House GOP leaders propose a new plan to avoid debt limit catastrophe

With just a few days left before the federal government reaches its borrowing limit, House Republican leaders on Tuesday evening unveiled another proposal to re-open the government and raise the borrowing limit that they hope can pass the embattled Republican-led chamber.

The key parts of the new plan would keep the government open through mid-December and grant the Treasury Department authorization to borrow through February. But the proposal also includes a stipulation that members of Congress, their staff and administration officials--including President Barack Obama--be forced obtain health insurance coverage through the exchanges established under Obamacare. Unlike most Americans, they would also not be eligible to receive federal subsidies to offset the cost of those plans or seek financial help from their employer.

The latest House Republican proposal comes after several days of intense and delicate negotiations between Senate Republicans and Democrats. Still, a Senate deal has not been announced, and lawmakers in the upper chamber said Tuesday they would wait for the House to act before discussing any new proposals. The House is expected to vote on its bill late Tuesday night.

The new House plan comes as Treasury Department says the U.S. government is close to running into the debt ceiling – effectively, permission from Congress to borrow money – which they say will take place Thursday or Friday.

Because the cash-strapped U.S. government needs to borrow cash to pay for existing programs, failure to raise the debt limit means that not long after Oct. 17 the government will not be able to pay all of its bills.

That raises the prospect of a default on America’s public debt as well as on other obligations like Social Security payments, which would send a shock wave through the fragile global economy. Independent economists have warned that the international financial system’s reliance on the American economy (and U.S. Treasury bills) mean that the global economy could face a fresh contraction, possibly a severe recession.

Heaping pressure on Congress, the Fitch ratings agency warned it could downgrade the United States credit rating from AAA, citing the “political brinkmanship” over the debt limit. 

“The prolonged negotiations over raising the debt ceiling (following the episode in August2011) risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S.,” the agency warned in a press release.

On Tuesday morning, House Republicans met privately for more than an hour in the basement of the Capitol on Tuesday morning--a meeting that began with a rendition of the song, "Amazing Grace"-- but finished with no clear proposal for how to avoid a possible federal default.

Based on reactions from House GOP members leaving the meeting, there appeared to be no consensus of support for the plan, which forced Republican House Speaker John Boehner and his lieutenants to work through the day to find support. Conservative lawmakers who for months have insisted that the health care law be repealed or delayed as part of any deal would obviously have to make concessions to their demands and therefore reject a noisy base that is urging them not to cave.

Democratic leaders in the Senate and White House officials, meanwhile, made clear that they would not accept the House proposals, even though nothing had been officially submitted for a bill.

"Let's be clear: The House legislation will not pass the Senate,” Democratic Senate Majority Leader Harry Reid said.

If the House passes its bill Tuesday night, the Senate must act quickly to pass the bill before the Thursday night deadline. Even in the best case scenario, it's going to be a close call. Chief Washington Correspondent Olivier Knox contributed to this report.

Source: http://news.yahoo.com/debt-ceiling-deal-in-congress-161907863.html
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