The bill to raise the country’s borrowing limit and prevent a possible U.S. debt default passed in Congress. But it not enough for the U.S. to maintain its coveted AAA debt rating, according to Fitch Ratings.
On Tuesday, Fitch said the agreement was an important first step but “not the end of the process.” The rating agency wants to see a credible plan to reduce the budget deficit.
David Riley, managing director at Fitch, told The Associated Press: “There’s more to be done in order to keep the rating in the medium-term no fax payday advances.”
Fitch expects to conclude its review of the U.S. sovereign rating by the end of August. As the debt deal currently stands, it is possible the U.S. debt rating could be downgraded at that time, Fitch said.
House Speaker John Boehner says the pact he’s reached with President Barack Obama and other leaders of Congress on lifting the debt limit and taming the budget “isn’t the greatest deal” but lives up to the GOP’s principles on taxes and spending.
The agreement pairs spending cuts demanded by Republicans with an immediate increase in the government’s borrowing cap that’s needed to avoid a first-ever default after Tuesday.
Boehner said the deal with Obama _ which contains no tax increases and sets the stage for more than $2 trillion in spending cuts _ shows how Republicans have changed the terms of debate in Washington.
The Ohio Republican says he wants to bring the measure to a vote as soon as possible.
The endgame at hand, House Republicans lined up Thursday to pass legislation to prevent looming government default while slicing nearly $1 trillion from federal spending. Senate Democrats pledged to scuttle the bill swiftly in hopes of forcing a final compromise.
“Let’s pass this bill and end the crisis,” said House Speaker John Boehner, the president’s principal Republican antagonist in a new and contentious era of divided government. “It raises the debt limit and cuts government spending by a larger amount.”
President Barack Obama has threatened to veto the measure, and in debate on the House floor, Rep. Debbie Wasserman Schultz of Florida savaged it as a “Republican plan for default.” She said the GOP hoped to “hold our economy hostage while forcing an ideological agenda” on the country.
Despite the sharp rhetoric, there were signs that gridlock might be giving way.
“Around here you’ve got to have deadlock before you have breakthrough,” said Sen. Kent Conrad, D-N.D. “We’re at that stage now.”
Wall Street suffered fresh losses as Congress struggled to break its long gridlock. The Dow Jones industrial average was down for a fifth straight session.
The Treasury Department moved ahead with plans to hold its regular weekly auction of three-month and six-month securities on Monday. Yet officials offered no information on what steps would be taken if Congress failed to raise the nation’s $14.3 trillion debt limit by the following day.
Without signed legislation by Aug. 2, the Treasury will not have enough funds to pay all the nation’s bills. Administration officials have warned of potentially calamitous effects on the economy if that happens _ a spike in interest rates, a plunge in stock markets and a tightening in the job market in a nation already struggling with unemployment over 9 percent.
White House press secretary Jay Carney outlined White House compromise terms: “significant deficit reduction, a mechanism by which Congress would take on the tough issues of tax reform and entitlement reform and a lifting of the debt ceiling beyond … into 2013.”
The last point loomed as the biggest obstacle.
The House bill cuts spending by $917 billion over a decade, principally by holding down costs for hundreds of government programs ranging from the Park Service to the Agriculture Department and foreign aid.
It also provides an immediate debt limit increase of $900 billion, which is less than half of the total needed to meet Obama’s insistence that there be no replay of the current crisis in the heat of the 2012 election campaigns.
An additional $1.6 trillion in borrowing authority would be conditioned on passage of at least $1.8 trillion in further savings to be recommended by a newly created committee of lawmakers. Those deficit reductions would presumably come from cuts to benefit programs such as Social Security and Medicare, as well as an overhaul of the tax code generating additional government revenue.
The GOP bill’s $917 billion in upfront spending cuts was trillions less than many tea party-backed rank-and-file Republican lawmakers wanted, but a total that seemed nearly unimaginable when they took power in the House last winter with an agenda of reining in government. Numerous Republicans grumbled that the legislation didn’t cut more deeply, and Boehner and the rest of the GOP leadership have spent their week cajoling reluctant conservatives to provide the votes needed to pass it.
By most accounts, they were succeeding.
“It gives us a little bit of heartburn because it doesn’t go big enough,” said Rep. Sean Duffy, R-Wis., a first-term lawmaker who said he would vote for the bill as the best one available.
Another first-term Republican, Rep. Martha Roby of Alabama, said the bill was “far from perfect. But I don’t have the luxury of writing the plan by myself, and neither does Speaker Boehner.”
While the White House and Democrats objected to the House bill, they readied an alternative that contained similarities.
Drafted by Senate Majority Leader Harry Reid, it provides for $2.7 trillion in additional borrowing authority for the Treasury. It also calls for cuts of $2.2 trillion, including about $1 trillion in Pentagon savings that assume the end of the wars in Iraq and Afghanistan.
Even before the House voted, Reid served notice he would stage a vote to kill the legislation almost instantly.
“No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now,” he said.
With the House and Senate focused on debt-limit legislation at opposite ends of the Capitol, eleven religious leaders protesting budget cuts were arrested in the Rotunda midway between the two chambers.
Democratic Rep. Chellie Pingree of Maine said on the House floor that they were praying for those who will be “hurt the hardest” by the bill being considered.
Rep. David Dreier, R-Calif., countered that he, too was praying _ to avoid a default.
The day’s events marked the climax of a struggle that began last winter, when the Treasury Department notified Congress it would need additional borrowing authority, and Boehner said any increase would have to include steps to reduce future spending.
At first the White House balked at the terms, then relented. That gradually morphed into a series of bipartisan negotiations, one led by Vice President Joe Biden, then another by Obama, and finally, a round of golf that led to stab at a “grand bargain” between the president and Boehner.
Boehner announced last Friday he was calling off the talks, setting in motion a frantic week of maneuvering as the default deadline grew near.
The top Democrat in the House reacted positively to a new bipartisan budget plan emerging in the Senate, even as a top House GOP military hawk said it would cut defense way too much.
Asked about the budget unveiled Tuesday by the Senate’s “Gang of Six” at a brief appearance with reporters Wednesday morning, House Minority Leader Nancy Pelosi, D-Calif., said, “It has some good principles in it.”
The group’s budget, which would slash the deficit by almost $4 trillion over a decade through a mix of spending cuts and new tax revenues, has also earned praise from President Barack Obama and many senators.
But House Armed Services Committee Chairman Howard “Buck” McKeon, R-Calif., blasted the Gang of Six plan in a missive to his panel members, saying it would cut the Pentagon way too deeply and would unfairly curb military health and retirement benefits.
“This proposal raises serious implications for defense and would not allow us to perform our constitutional responsibility to provide for the safety and security of our country,” McKeon wrote in a memo to panel Republicans.
The mixed reviews came as an impasse in Washington over how to raise the nation’s borrowing cap to avoid a default on U.S. obligations dragged on with less than two weeks to an Aug. 2 deadline.
On Tuesday, the House doubled down on a symbolic vote to condition any increase in the government’s borrowing authority on congressional passage of a balanced budget constitutional amendment and a fresh wave of spending cuts. In the Senate, however, many Republicans warmed to a new bipartisan budget plan revealed a thawing in GOP attitudes on new tax revenues.
The plan by the Gang of Six is far too complicated and contentious to advance before an Aug. 2 deadline to avoid a default that Treasury Secretary Timothy Geithner and other experts warn would shake the markets, drive up interest rates and threaten to take the country back into a recession. But the plan’s authors clearly hope it could serve as a template for a “grand bargain” later in the year that could erase perhaps $4 trillion from the deficit over the coming decade.
Speaking on the Senate floor Wednesday morning, Democratic leader Harry Reid said he was confident Obama and congressional negotiators could avoid a government default, but the Senate still needed to hear from the House.
“We have a plan to go forward over here so I await word from the Speaker,” said the Nevada lawmaker, who also mentioned that he spoke to Obama Tuesday night. Reid was referring to a plan he’s working on with GOP leader Mitch McConnell of Kentucky to give Obama new powers to obtain an increase in the borrowing cap unless overridden by Congress.
In the House, the 234-190 vote Tuesday to pass the House GOP “cut, cap and balance” plan reflected the strength of tea party forces elected in last year’s midterm election. GOP conservatives reveled in their victory, however temporary it may be, since the plan faces a White House veto threat and is a dead letter in the Senate anyway.
“Let me be clear. This is the compromise. This is the best plan out there,” said Rep. Jim Jordan, R-Ohio, head of a conservative House group known as the Republican Study Committee.
The GOP measure would impose an estimated $111 billion in immediate spending cuts next year and would cap overall spending at levels called for in the House’s April budget plan, backed up by the threat of automatic spending cuts. But what conservatives like most about it is its requirement that Congress approve a balanced budget amendment to the Constitution _ a step that requires a two-thirds vote in both House and Senate _ before any increase in the current $14.3 trillion debt limit can be shipped to Obama.
The balanced budget amendment requires limiting the size of government to 18 percent of the size of the economy, sparking a furious assault from Democrats who say it would force Medicare cuts much deeper than the controversial House GOP budget plan that passed in April _ which cut spending to 20 percent of the gross domestic product.
“The most elementary budget arithmetic dictates that you cannot limit the federal budget to 18 percent of GDP and continue to sustain Medicare,” said Sen. Tom Harkin, D-Iowa.
Now that the House has blown off steam, Obama said Tuesday that he wants to “start talking turkey” with top congressional leaders like House Speaker John Boehner, R-Ohio, Senate Majority Leader Harry Reid, D-Nev., and Senate GOP leader Mitch McConnell of Kentucky. A White House meeting had yet to be scheduled, though Obama seemed to hint one could take place Wednesday.
Reid has lined up behind a controversial McConnell plan to allow Obama to order up as much as $2.5 trillion in new debt without approval by Congress, which could only block the administration from issuing new debt if Congress disapproves by a veto-proof two-thirds margin in both House and Senate.
In exchange, Reid wants to attach to the McConnell plan a requirement for a bipartisan panel of 12 lawmakers to negotiate on a compromise that could come up for a vote later this year.
The Gang of Six plan promises almost $4 trillion in deficit cuts, including an immediate 10-year, $500 billion down payment that would come as Congress sets caps on the agency budgets it passes each year. It also requires an additional $500 billion in cost curbs on federal health care programs, cuts to federal employee pensions, curbs in the growth of military health care and retirement costs, and modest cuts to farm subsidies.
It also requires a major influx of new tax revenues as Congress overhauls the loophole-choked U.S. tax code. It calls for getting rid of myriad tax loopholes, preferences and deductions and using the savings to sharply lower income tax rates. But $1 trillion to $2 trillion would be skimmed off the top and used to reduce the deficit, depending on who does the calculations.
House GOP leaders were muted in their criticism and pointed to promised reductions in income tax rates rather than the net increase in overall tax collections.
“On the positive side, the tax rates identified in the Gang’s plan _ with a top rate of no more than 29 percent _ and the president’s endorsement of them are a positive development and an improvement over previous discussions,” House Majority Leader Eric Cantor, R-Va., said. “That said, I am concerned with the Gang of Six’s revenue target.”
The tax reform outline would set up three income tax rates _ a bottom rate of 8-12 percent, a middle rate of 14-22 percent and top rate of 23-29 percent _ to replace the current system, which has a bottom rate of 10 percent with five additional rates, topping out at 35 percent. It would reduce but not eliminate tax breaks on mortgage interest, higher-cost health plans, charitable deductions, retirement savings and families with children.
Ontario
Boaters were warned to stay off an oil-fouled stretch of Montana’s popular Yellowstone River Friday, as lawmakers on Capitol Hill pressed regulators to bolster the country’s pipeline safety rules following a string of high-profile spills and explosions.
The warning from state officials to stay off a 22-mile stretch of the river between Laurel and Lockwood comes after an Exxon Mobil pipeline failure spewed an estimated 1,000 barrels of crude into the flooding river July 1.
More than 50 boats and hundreds of workers are involved in the cleanup. Officials say people recreating on the river could pose a safety risk.
The cause of the spill remains under investigation. Richard Opper with the Montana Department of Environmental Quality said Friday that an initial investigation shows the pipeline was completely severed in the accident.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
Legislators questioned federal officials Friday about their plans to tighten the country’s pipeline safety rules following numerous high-profile spills and explosions during the past year, asking whether the lead agency overseeing energy pipelines had been overly cozy with the industry.
The agency’s highest concern is public safety, and reform proposals pending before Congress will give the government the authority it needs to prevent accidents, Cynthia Quarterman, administrator of the Pipeline and Hazardous Materials Safety Administration, told a congressional committee.
“Having spent time with the employees within the agency, I know they may have concerns about upper-level leadership but in terms of their commitment to the mission, it is the highest thing on their mind,” Quarterman testified at the hearing. “To a person, their concern is the safety of the public.”
It will likely be months before investigators determine what caused an oil pipeline to rupture near Billings, Mont., on July 1, spilling about 1,000 barrels of crude into the scenic Yellowstone River. The spill fouled dozens of miles of shoreline and backwaters.
Committee members also quizzed Quarterman and other panelists about a Pacific Gas & Electric Co. natural gas pipeline explosion last year in San Bruno, Calif., that killed eight people, injured many more and left 38 homes in smoking ruins.
Also mentioned was the rupture of an Enbridge Inc. pipeline in July of last year in southwest Michigan, which spilled more than 800,000 gallons of oil into the Kalamazoo River.
“The industry has been driving policy,” said U.S. Rep. Jackie Speier, a California Democrat whose district includes San Bruno. “We’ve got to make it safe for the consumers, for the ratepayers.”
Michigan Republican Rep. Fred Upton, who chairs the Committee on Energy and Commerce, compiled a large list of witnesses including several members of the oil and gas industry, but testimony from ExxonMobil Pipeline Co. was postponed for a second hearing next Thursday.
Quarterman said the Montana accident has focused her agency’s attention on preventing pipeline failures.
She previously said it will likely be August or September before water levels in the river are low enough to exhume the section of damaged pipe responsible for the spill.
It could take two months after that before investigators identify a cause, and her agency won’t know for certain how large the leak was until it examines records at the company’s control room in Houston, she said at another congressional hearing Thursday.
__
Burke reported from San Francisco.
WASHINGTON
WASHINGTON
TODAY
Marketing
TOKYO/NEW YORK
Powered by WordPress -- XHTML 1.0