Washington (AFP) – The White House said Thursday President Barack Obama would be open to a Republican plan for a short-term debt ceiling hike — but only if no conditions are attached hold him “ransom.”
White House spokesman Jay Carney also warned Obama would not accept another part of the evolving Republican approach to end a political impasse — negotiations on long-term budget deal before the federal government is reopened.
Fast moving political maneuvering on Thursday led to the first signs that the imbroglio which has sent hundreds of thousands of federal workers home and sparked fears of a debt default, could be drawing to an end game.
House of Representatives Speaker John Boehner, caught between his restive caucus and fears the U.S. could default without a deal to raise the debt ceiling by October 17, made the early running.
“Listen, it is time for leadership,” said Boehner, emerging from a meeting with Republican lawmakers to offer a six-week extension of U.S. borrowing authority.
But the Republican plan would not end the partial shutdown of the U.S. government until Obama enters talks on a long-term budget deal — a step the White House has so far refused to take.
The White House reacted to the debt ceiling offer cautiously, apparently awaiting to ensure that the Republican proposal does not come with conditions attached.
“The president is happy that cooler heads at least seem to be prevailing in the House, that there at least seems to be a recognition that default is not an option,” White House spokesman Jay Carney said.
“We will see what the House Republicans propose, we will see what they are able to pass and consider it then,” Carney said.
“The president has always said he would sign a clean debt limit increase,” Carney said, but said Obama would prefer a long-term rather than a short-term solution to the issue.
He reaffirmed: “He’s been very clear. He will not pay ransom in exchange for the Republicans in the House doing their job.”
Obama will likely get a look at the exact Republican proposal for a six week hike to U.S. borrowing authority at a meeting with party leaders at the White House later Thursday.
News of a possible deal sparked optimism on Wall Street, with all three major equity indices trading higher.
By midday, the Dow Jones Industrial Average was up 1.6 percent, and the gains on the Nasdaq topped two percent.
Earlier, Treasury Secretary Jack Lew warned a U.S. default would be “deeply damaging” to financial markets and cause economic chaos.
“If Congress fails to meet its responsibility, it could be deeply damaging to the financial markets, the ongoing economic recovery, and the jobs and savings of millions of Americans,” Lew told the Senate Finance Committee.
Failure to agree on a budget led to the first government shutdown in 17 years on October 1, the beginning of fiscal year 2014.
Senate Finance Committee chairman Max Baucus framed the crisis in near-apocalyptic terms.
“While the government shutdown has been disruptive, a default would be a financial heart attack,” he told the hearing. “It would have widespread, long-term economic consequences.”
Other countries were closely watching the unfolding crisis, fearful of reverberations in their economies.
Premier Li Keqiang of China, the largest foreign holder of U.S. government debt, reiterated his country’s “concern about Washington’s debt ceiling problem” when he spoke with Secretary of State John Kerry at an Asian summit Thursday in Brunei, according to China’s official Xinhua news agency.
The state-run China Daily newspaper in Beijing blasted “the astonishing failure” of the U.S. Congress.
“It is pitiful that the U.S. is now putting the fragile world recovery under renewed threat with its mind-boggling political infighting,” it said.
Obama has said he is willing to talk to Republicans on a long term budget deal and other fiscal issues, but only when the government is reopened and the debt ceiling is lifted.
Republican lawmakers said reaction in the party caucus was mixed to Boehner’s plan.
“What the speaker is trying to do is just to get this man to sit down and talk to us,” said congressman Lou Barletta, referring to Obama.
Representative Kevin Brady clarified that Boehner’s offer was not a mere clean debt ceiling hike, saying: “We provide a six-week hard date extension of the debt ceiling on the condition that both parties name budget conferees, and that the president come to the table to negotiate re-opening the government, as well as finding a final solution to the debt ceiling. That’s my understanding.”