Obama warns of risk of ‘very deep recession’ if debt ceiling isn’t raised - The Buffalo News
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Obama warns of risk of ‘very deep recession’ if debt ceiling isn’t raised

President Obama said the U.S. economy risks a “very deep recession” if Congress doesn’t raise the $16.7 trillion debt ceiling.

Speaking at a news conference at the White House, Obama said he’s willing to talk to Republicans about anything, including changes to his health-care law, once lawmakers end the partial government shutdown and increase the country’s borrowing authority.

“Let’s lift these threats from our families and our businesses,” he said.

Obama spoke less than four hours after he called House Speaker John Boehner to “reiterate that he won’t negotiate on a government-funding bill or debt-limit increase,” said Brendan Buck, a Boehner spokesman.

Lawmakers are taking the first tentative steps toward resolving the standoff. Both sides are exploring actions that will be needed to end the week-old shutdown and raise the debt limit before U.S. borrowing authority lapses Oct. 17.

Obama didn’t answer directly when asked whether he planned to set priorities on interest due to bondholders, noting the potential effects of missing other government payments.

“We’ve got senior citizens who are counting on their Social Security check arriving on time,” he said. “We are exploring all contingencies.”

Senate Majority Leader Harry Reid called all 100 senators to the floor for a debate this afternoon.

Senate Democrats will introduce a bill today that would raise the debt ceiling for a year, said Sen. Charles Schumer, a New York Democrat. They are planning a test vote before the end of this week.

To succeed, they’ll need support from at least six Republicans on procedural votes. They’ve gotten backing from one Republican, while several others haven’t ruled out the possibility.

Risk appetites in U.S. capital markets diminished amid the U.S. budget impasse, pushing Treasury one-month bill rates to the highest since 2008 and Internet stocks to the biggest losses in two years.

Rates on one-month bills reached 0.34 percent, the highest since October 2008, while the Standard & Poor’s 500 Index slipped 0.8 percent to 1,662.77 at 1:36 p.m. in New York. The Nasdaq Internet Index tumbled 3.8 percent, the most since November 2011. The MSCI Emerging Markets Index added 0.3 percent, paring an earlier rally of 0.6 percent, with China’s benchmark index rising more than 1 percent as trading resumed after a holiday. The yen slid 0.2 percent against the dollar.

The Senate Democrats’ plan emerged as Gene Sperling, the director of Obama’s National Economic Council, opened another route toward at least a temporary resolution. He declined to rule out a short debt-limit extension while reiterating the administration’s preference for a longer-term agreement.

House Republicans, who had previously discussed pairing a debt-limit increase with a list of party priorities, haven’t released legislation or set a time line for action. Instead, they’re planning to vote to appoint a working group of House members and senators to settle the multiple impasses.

“The American people are watching an unwillingness by one side to negotiate and compromise,” Representative Tom McClintock, a California Republican, told reporters in Washington today. “They are watching utterly vindictive actions by the administration to intensify the pain of the shutdown and I think they watching the collapse of the administration’s signature program, Obamacare.”

‘Votes exist’

House Democrats rejected the idea, saying it would recreate the 2011 bipartisan supercommittee that was deadlocked.

“We don’t need a supercommittee,” said Rep. Xavier Becerra, a California Democrat. “The votes exist right now” to reopen the government.

Still to be determined is whether House Republicans will consider a vote to raise the debt-ceiling this week or wait for the Senate to act, said two Republican congressional aides, speaking on condition of anonymity to discuss party strategy.

If all Senate Democrats along with six Republicans vote for giving Obama authority, they could send a debt-limit increase without policy conditions to the Republican-controlled House early next week. That would put pressure on Boehner, who opposes a clean debt-limit bill.

“We’ve got a situation where you have a calendar running, you have people who are frustrated and upset, and so let’s figure it out,” Sen. Lisa Murkowski, an Alaska Republican, said in an interview at the Capitol yesterday. “We shouldn’t be dismissing anything.”

Sen. Heidi Heitkamp, a North Dakota Democrat, wouldn’t take a position on a clean debt-ceiling increase when asked by reporters yesterday. Sen. Joe Manchin, a West Virginia Democrat, didn’t commit his support either.

Republican Mark Kirk of Illinois will support a clean debt-limit increase. About a half-dozen others – including Murkowski, John McCain of Arizona, Bob Corker of Tennessee and Susan Collins of Maine – kept open the option of voting for a debt-ceiling increase without conditions or helping one pass.

None of the proposals being floated has been embraced by both parties and all face long odds.

The chance of a U.S. government default is “reasonably high,” Bruce Ratner, chairman of developer Forest City Ratner Cos., said in an interview on Bloomberg Television today. There’s a “small group of people who don’t have an understanding of how serious it is,” he said, adding that “the ramifications are huge.”

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