Debt limit overtaking shutdown as U.S. crisis focus

By DAVID ESPO

Associated Press

WASHINGTON — A possible national default loomed closer on Monday as the partial government shutdown lingered, rattling markets in the U.S. and overseas. A gridlocked Congress betrayed little or no urgency toward resolving either of the threats.

Stocks got a case of the jitters on Wall Street, and halfway around the world China stressed the importance for the international economy of raising the U.S. debt limit.

“Safeguarding the debt is of vital importance to the economy of the U.S. and the world,” Vice Finance Minister Zhu Guangyao said, according to the official Xinhua News Agency. China holds $1.277 trillion in U.S. Treasury bonds, second only to Japan.

At home, the political rhetoric was unchanged — and generally uncompromising — while a new poll suggested Republicans are paying a heavier price than Democrats for the deadlock.

President Barack Obama said the House should vote immediately on ending the partial closure of the federal establishment. He accused House Speaker John Boehner of refusing to permit the necessary legislation to come to the floor because he “doesn’t apparently want to see the … shutdown end at the moment, unless he’s able to extract concessions that don’t have anything to do with the budget.”

Boehner, in rebuttal, called on Obama to agree to negotiations on changes in the nation’s health care overhaul and steps to curb deficits, the principal GOP demands for ending the shutdown and eliminating the threat of default.

“Really, Mr. President. It’s time to have that conversation before our economy is put further at risk,” the Ohio Republican said in remarks on the House floor.

Obama said he would talk with the Republicans on those topics or virtually any others.

But the White House has said repeatedly the president will not negotiate until the government is fully re-opened and the debt limit has been raised to stave off the nation’s first-ever default.

White House aide Jason Furman told reporters that if Boehner “needs to have some talking point for his caucus that’s consistent with us not negotiating … that’s not adding a bunch of extraneous conditions, of course he’s welcome to figure out whatever talking point he wants that helps him sell something.”

The current standoff is the latest in a string of clashes over the past three years between Obama and a House Republican majority that has steered to the right with the rise of the tea party.

Most Democrats and many Republicans have assumed the GOP will pay a heavier price for a shutdown than the Democrats, since that was the case in 1996.

And a survey released by the Washington Post-ABC said disapproval of Republicans was measured at 70 percent, up from 63 percent a week earlier. Disapproval of Obama’s role was statistically unchanged at 51 percent.

In the Senate, where majority Democrats forced approval of legislation before the shutdown aimed at preventing it, officials said Majority Leader Harry Reid was drafting a bill to raise the current $16.7 trillion debt ceiling before the Oct. 17 deadline when Treasury Secretary Jacob Lew has said the government will reach its borrowing limit.

The measure would allow the government to meet its borrowing needs through the 2014 elections, officials said, although few details were immediately available.

Assuming Democratic support, the bill could pass the Senate quickly if Republicans merely vote against it as they press for concessions from the White House. But passage could be delayed until Oct. 17 if the GOP decides to mount a filibuster.

Separately, a White House aide said Obama would be receptive to an interim, short-term measure to prevent default.

In the House, Republicans declined to say when they would put debt limit legislation on the floor for a vote.

Instead, the public agenda for the day consisted of legislation to reopen the Food and Drug Administration, the latest in a string of measures to soften the impact of the partial shutdown. The measure was approved 235-162.

Earlier House-passed bills would end the shutdown at national parks, the National Guard and Reserves and the Women, Infants and Children nutrition program, and ease effects for the Washington, D.C., government, among other locations. Each of the measures cleared the House with some Democratic support.

Yet each is under a veto threat by the White House, and Reid opposes them in the Senate as far less than the full restoration of government services that most Democrats favor.

Still, the shutdown eased over the weekend, when about 350,000 civilian defense workers were recalled as the result of legislation Congress passed and Obama signed after the shutdown began.

That left an estimated 450,000 federal employees idle at agencies responsible for domestic programs, ranging from the Departments of Education to Energy, and including Labor, Health and Human Services, Interior, Transportation and more.

The shutdown was felt unevenly, however, because of bewilderingly complex rules and the ability of senior officials to declare some projects essential and therefore allowed to remain open.

Some routine food checks by the FDA were suspended, but the Department of Agriculture’s meat inspections continued uninterrupted. Much of the nation’s space agency was shuttered, although work continued on plans to launch a robotic probe to Mars, which has a once-every-two-years launch window.

Despite the order returning civilian Pentagon workers to their government jobs, defense contractor Lockheed Martin announced it would furlough about 2,400.

Top defense officials noted that despite the recall of most civilians, and the resumption of many activities across the Defense Department, there are critical programs and benefits that remain halted, according to a Pentagon report on their meeting with Defense Secretary Chuck Hagel.

For example, the department does not currently have the authority to pay death gratuities for the survivors of service members killed in action – typically a cash payment of $100,000 paid within three days of the death of a service member.

The Federal Emergency Management Agency, where Obama visited, served as a demonstration for the variable impact of the partial shutdown.

Officials said the agency had furloughed about 86 percent of its workers, then had recalled about 200 of them last week to prepare for the threat posed by Tropical Storm Karen in the Gulf Coast region.

With the threat passed, Obama said at least 100 of them have been re-furloughed.

“That’s no way of doing business,” he said.

Whatever the shutdown’s inconveniences, it was easily rivaled by the warnings over a default, in which the United States would not be able to pay all its bills.

“A default would be unprecedented and has the potential to be catastrophic,” a Treasury report said. “Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world.”

Private economists generally agree that a default on the U.S. debt would be extremely harmful.

especially if the impasse was not resolved quickly.

Lew has said that while Treasury expects to have $30 billion of cash on hand on Oct. 17, that money would be quickly exhausted in paying incoming bills given that the government’s payments can run up to $60 billion on a single day.

Associated Press writers Martin Crutsinger, Jim Kuhnhenn, Donna Cassata and Alan Fram contributed to this story.