Richard Rubin, Kathleen Hunter and Roxana Tiron Washington
The bi-partisan leaders of the US Senate reached an agreement yesterday to end the fiscal impasse and to increase the government’s borrowing authority. The Senate and House of Representatives still had to vote on it.
The agreement would end the 16-day government shutdown and allow the US to continue borrowing, but it sets up another round of confrontations early next year.
“The compromise we reached will provide our economy with the stability it desperately needs,” Senate majority leader Harry Reid said.
The agreement concludes a four-week stand-off that began with Republicans demanding defunding of President Barack Obama’s 2010 health-care law, and objecting to raising the debt limit and funding the government without policy concessions. They achieved almost none of those goals.
“This is far less than many of us had hoped for, frankly, but it’s far better than what some had sought,” said Mitch McConnell, the Senate minority leader, who said the bill retained Republican-preferred spending levels.
The framework negotiated by Reid and McConnell would fund the government at those Republican-backed levels to January 15 next year and suspend the debt limit until February 7, setting up another round of disputes.
The Standard & Poor’s 500 index had risen 1.2 percent to 1 717.67 by just before 1pm in New York, after sliding 0.7 percent on Tuesday.
Rates on treasury bills maturing in the next six weeks fell amid optimism legislators would resolve the impasse. Rates on $120 billion (R1.2 trillion) of bills maturing today rose as high as 0.36 percent on Tuesday before dropping to 0.13 percent.
One-month rates had fallen 7 basis points to 0.27 percent by 10.14am in New York after touching 0.45 percent – the highest since October 2008. The benchmark 10-year yield rose 2 basis points to 2.75 percent, according to Bloomberg data.
Republicans “left everything on the table” by pursuing a wrong-headed strategy, South Carolina Senator Lindsey Graham said yesterday. “We took some bread crumbs and left the entire mill on the table,” he said. “This has been a very bad two weeks for the Republican brand.”
The Senate agreement trades pressing and already missed payment deadlines for new ones over the next four months. The Treasury would be allowed to use so-called extraordinary measures to delay default for about another month beyond February 7, said a Senate Democratic aide who spoke on condition of anonymity.
The Senate accord included a Republican-backed provision to tighten income verification rules for people receiving health insurance subsidies, two Senate Democratic aides said. The deal would exclude a health-law provision that would delay a reinsurance fee on group health plans. – Bloomberg