US Senate, House closing in on funding, debt deals

WASHINGTON (AP. Bloomberg) - Leaders in the House of Representatives and Senate were negotiating separate but similar plans on Tuesday to reopen the US government and prevent a default on American debt that economists say could tip the global economy back into recession.

Both plans would fund the government through Jan 15, 2014 and suspend the US debt limit until Feb 7.

But the House proposal goes beyond the Senate with two smaller changes to the health care law. It would delay for two years a medical-device tax and prevent the government from contributing to the health insurance of members of Congress, the president, the vice president and the Cabinet.

The House plan also falls far short of Republican efforts last month to defund or delay major pieces of the 2010 health law.

The White House has quickly voiced opposition to the House measure.

"The President has said repeatedly that members of Congress don't get to demand ransom for fulfilling their basic responsibilities to pass a budget and pay the nation's bills," said Ms Amy Brundage, a White House spokeswoman. "Unfortunately, the latest proposal from House Republicans does just that in a partisan attempt to appease a small group of Tea Party Republicans who forced the government shutdown in the first place."

But in a brief meeting with reporters on Tuesday morning, Speaker John Boehner and the House Republican leadership said their plan was focused on "fairness for the American people under Obamacare" an indication that they wanted to insure the elimination of health care subsidies for the president, vice-president, his Cabinet and members of Congress, and tighter income verification requirements for individuals who qualify for federal subsidies under the health care law.

House Minority Leader Nancy Pelosi said it was clear that Mr Boehner had failed to win the backing of sufficient House Republicans to support the plan that had been floated earlier in the day.

With just two days left before the Treasury Department says it will run out of borrowing capacity, congressional aides predicted Democratic Senate Majority Leader Harry Reid and Republican leader Mitch McConnell could seal an agreement by midday, easing dual crises that have sapped confidence in the world's dominant economy and badly shaken support for Republicans. Both House and Senate Republican leaders scheduled private meetings with their rank-and-file on Tuesday.

The partial government shutdown, which has furloughed 350,000 federal workers, began on Oct 1 after Congress failed to pass a bill to temporarily funding the government. Separately, if Congress doesn't approve a measure increasing the amount of money the government is allowed to borrow, the Obama administration says it will not be able to pay America's bills on time, risking a default that analysts say could prove catastrophic for the economy. Both legislative measures are normally routine.

With Republican poll numbers plummeting and Americans growing weary of a shutdown entering its third week, Senate Republicans in particular were eager to end the partial government shutdown - and avoid an even greater crisis if the government were to default later this month.

The US stock market was mixed Tuesday morning, while stocks in Asia and Europe were tracking upward.

While Mr Boehner was vague about a vote in the House, Republican Rep Darrell Issa said his party planned to pass its measure later on Tuesday. The House Republican plan wouldn't win nearly as many concessions from Mr Obama that Republicans had sought but it would set up another battle with the White House early next year. It also likely wouldn't get much support from Democrats.

The bipartisan Senate plan, meanwhile, is far from the assault on Mr Obama's signature health-care reform law that conservative tea-party Republicans originally demanded as a condition for a short-term funding bill to keep the government fully operational. It also lacks the budget cuts demanded by Republicans in exchange for increasing the government's US$16.7 trillion (S$ 20.8 trillion) borrowing limit.

Instead, it may repeal a US$63 fee that companies must pay for each person they cover beginning in 2014.

Any legislation backed by both Mr Reid and Mr McConnell can be expected to sail through the Senate, though any individual senator could delay it.

It had been a different story in the Republican-controlled House of Representatives, where conservative backing is proving hard to find.

Republican Rep Joe Barton signalled that conservative members of the House were deeply sceptical. He said on Monday the plan to end the crisis must have deep spending cuts to win his vote and that he thought Mr Obama and Treasury Secretary Jacob Lew had more flexibility than they had said publicly.

"No deal is better than a bad deal," Mr Barton said.

Asked whether the emerging package contained any victories for Republicans, Rep James Lankford, a member of the House Republican leadership, said, "Not that I've seen so far, no."

In addition to approving legislation to fund the government until late this year and avert a possible debt crisis later this week or month, the potential deals would set up broader budget negotiations between the Republican-controlled House and Democratic-led Senate with one goal being to ease automatic spending cuts that began in March and could deepen in January, when about US$20 billion in further cuts are set to slam the Defence Department.

Democrats don't want to repeal the medical device tax and also want to preserve the Treasury Department's ability to use extraordinary accounting measures to buy additional time after the government reaches any extended debt ceiling. Such measures have permitted Treasury to avert a default for almost five months since the government officially hit the debt limit in mid-May, but wouldn't provide that much time next year, experts said.