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Budget rift pushes US to brink of debt default



The US Capitol Dome is seen in the distance as American flags fly on the National Mall around the base of the Washington Monument, Tuesday, Oct. 15, 2013, in Washington. The federal government remains partially shut down and faces a first-ever default between Oct. 17 and the end of the month. AP

WASHINGTON—A dramatic day of political breakdowns thrust the United States dangerously close Tuesday to a debt default deadline and left the global economy exposed to unpredictable knock-on turmoil.

Just 31 hours before the US government begins to run short of money to pay its bills, there was no clear way out of a stalemate that has called the dollar’s status as the world’s reserve currency into question.

Major world powers looked on in dismay at the brinkmanship and political recriminations in Washington, fearing reverberations that could wreak havoc in their own sometimes weakened economies.

“We’re far from a deal at this point,” White House spokesman Jay Carney admitted on Tuesday.

If Congress does not raise the government’s current $16.7 trillion debt ceiling by October 17, the Treasury will have too little money coming in via tax receipts to meet all of its obligations.

It would be forced to choose, for example, between honoring bond payments and shelling out Social Security checks to older citizens.

Amid rising anxiety on the markets, the financial rating agency Fitch put the United States on warning for a downgrade from its top grade AAA spot.

Despite the impasse in the US capital, President Barack Obama said he still expected the issue would be resolved in the end.

“My expectation is that this gets solved, but we don’t have a lot of time,” he told an ABC television affiliate in New York.

“What I’m suggesting to the congressional caucus is to avoid any posturing … do what’s right, open the government and make sure we pay our bills.”

Overnight hopes for an agreement between Senate Republicans and Democrats on raising US borrowing faded when conservative Republicans in the House of Representatives seized back the initiative in the morning.

The party made several new attempts to constrain Obama’s signature health care law—defying White House demands for a bill lifting the debt ceiling without conditions.

The latest Republican measure would raise borrowing authority until February 7 and reopen the government until December 15.

In turn, the bill demands an end to health care subsidies for members of Congress, aides and White House and cabinet officials and takes away the Treasury’s power to take special measures to manage US debt obligations.

Senate talks were meanwhile on hold pending developments in the House—effectively leaving efforts to end the crisis in limbo.

“It’s all fallen apart,” said Democratic Senator Dianne Feinstein. “We are stunned by the reaction in the House.”

Senate Democratic leader Harry Reid furiously accused Republican House Speaker John Boehner of seeking to save his own political skin at the expense of the United States.

“Let’s be clear: the House legislation will not pass the Senate,” Reid said. “I am very disappointed with John Boehner, who would once again try to preserve his role at the expense of the country.”

Boehner was left once again with the unenviable choice that has come to define his speakership in Washington’s divided government.

Does he stick with the Tea Party faction of his party, and possibly save his job but risk culpability in sending the US economy into a first default of modern times?

Or does he try to pass a compromise plan acceptable to Senate Democrats and Obama, with the help of minority Democratic votes—a scenario that could fritter away his party power base and possibly cost him his job?

A Boehner ally, Congressman Devin Nunes, told CNN there would be a House vote on the latest Republican plan on Tuesday evening.

Democratic House minority leader Nancy Pelosi said at the White House after a meeting with Obama that the plan was a “vote for default” and would get no Democratic support.

But she said she was optimistic that “sanity” would prevail even if the latest Republican bill was passed, predicting it would be sent back to the House by the Senate.

Republican Senator John McCain, who has been critical of his own party’s conduct in seeking to use the debt limit as leverage, turned fire on the White House and Democrats, calling on them to negotiate an exit strategy with Boehner.

“It’s piling on and it’s not right,” McCain said.

China and Japan, which between them hold $2.4 trillion in US Treasuries, are already alarmed at the implications of the crisis.

Japan’s Finance Minister Taro Aso said many US politicians “don’t seem to understand well the magnitude of the international impact this problem could have.”

And China’s Vice Finance Minister Zhu Guangyao, in Beijing, said: “We demand that the US side, as the issuing country of the major reserve currency… should undertake its due responsibility.”

Investors endured a roller coaster day. US stock markets closed down after a day of wild fluctuations, with the Dow Jones Industrial Average shedding 133.25 points (0.87 percent) to 15,168.01.

The broader S&P 500 fell 12.08 (0.71 percent) to 1,698.06, and the Nasdaq Composite lost 21.26 (0.56 percent) at 3,794.01.

The State Department, meanwhile, warned that dysfunction in Washington undermined America’s image abroad.—Stephen Collinson, Michael Mathes


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Tags: Budget , economy , politics , US

  • 33Sam

    THIS IS NOT JUST AMERICA GOING THROUGH THIS.

    SEEN THE PHOTOS OF WALMART AFTER THE EBT COLLAPSE RIOT??

    IT IS THE ENTIRE PLANET AND ALL BY DESIGN.

    IT IS AGENDA 21

    CHINA WILL GO BANKRUPT AS WELL.

    THE SAME PEOPLE CONTROLLING THE WORLD’S ECONOMY ALREADY FIGURED THESE THINGS OUT AND ITS NOT A PRETTY PICTURE.

    DAVOS MEETING TALKED ABOUT TRILLIONS IN TAXES TO BE COLLECTED.

    CHASE JUST LIMITED BANK WITHDRAWALS AND CANCELLED INTERNATIONAL WIRE TRANSFERS.

    AGENDA 21 IS BANKRUPTCY THAT LEADS TO HEGEMONIC GENOCIDE!!!

  • NoWorryBHappy

    :

    A US default on its debt repayments is NO small matter. Even a short term US default will have DIRE consequences in financial markets and national economies worldwide. At THIS time, the Bangko Sentral ng Pilipinas MUST have a CONTINGENCY PLAN in place for the Philippine economy to cushion the effects of this US default. It is far better to have a conitingency plan than to have nothing at all. Survival ALWAYS favor the prepared. And I always say, ONLY the Filipinos can better take care of the Filipinos.
    :

    • 33Sam

      “ONLY the Filipinos can better take care of the Filipinos.”

      YUP!!!

  • kilabot

    tea party congs are doing the right thing.
    don’t give obama a free pass;
    he created this mess in the first place;
    promoting voodoo policies detrimental
    to usa standing around the globe;
    tea party’ers are the only hope
    to bring back sanity in usa.

    • NoWorryBHappy

      :

      tea party’ers are the only hope
      to bring back sanity in usa.

      :
      Hope is not a plan. Hope is a disaster waiting to happen.
      The Tea Party is a small, noisy group with extreme right social, financial and political views that has infested a struggling GOP. Much like the Islamic fundamentalist group that scuttled the Miss World event in Indonesia recently. The Tea Party has thrown the GOP into disarray. It will not be surprising to know if any of them will be linked to White Supremacist groups.

      :

    • crazy_horse_101010

      hang the tea party. a herd of morons led by palin who couldnt even run alaska and her own family

      • 33Sam

        IGNORANT MORON IS INTO DEVIL WORSHIP.

        HORSES DO NOT CLIMB WALLS…

        AND PALIN ISN’T LEADING ANYONE…

      • crazy_horse_101010

        thats one of the dumbest postings ive seem even from you. what does horse climbing have to do with anything moron ? and im sure you can prove im into devil worship ypu would never lie would you chinese azz kisser. and guess what you arent leading anyone either because everyone knows you are a insane wacko and crybaby who lives by lies. so BITE ME PIGS AZZ hawhawhaw stupidsssssssssasssssassssssass.

  • Ragna_rok

    China is the largest investor in US Bonds.
    It will also drag economy in China since US fails to pay Chinese investors.

    America will say “you think we, Americans are only experiencing economic hell? don’t worry China, we will also drag you with us down”

  • disqus_EWrSdjV1nv

    US is Walmart. they have less customers now. let it close.
    China is like SM, robinson and puregold. its open and it grows.
    Ph is like a tiangge. its closing soon once savemore and puregold jr reaches them.
    Babay US.
    hello China.
    (just make sure manila police monitors them so their numbers can be reduced. )j/k

    • Ragna_rok

      Sabi ng instik sa kano “Ako payag utang pero ikaw kano ayaw bayad”

      Sagot ng Kano “Shut up there, we are having problems already here, your Chinese money is our last concern”

  • Markdnvr

    this is the end.. hold your breath and count to ten.
    it’s time for nations to stand on their own including the Philippines. No one can rely on someone who’s falling.



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