Struggling to avert an unprecedented national default, congressional leaders jettisoned negotiations on a sweeping deficit-reduction package Friday despite a plea from President Barack Obama to “do something big” to stabilize America’s finances.
Instead, lawmakers embarked on rival fallback plans as a critical Aug. 2 deadline neared, a House version given little chance of success, even by some supporters, and a bipartisan Senate approach holding out more promise.
At the behest of conservatives, House Republicans announced plans to vote next week on legislation to raise the $14.3 trillion debt limit automatically if Congress approves a balanced-budget constitutional amendment. Senate approval of that amendment seemed extremely unlikely in a vote set for the next few days.
Senate leaders from both parties worked on their own measure that would allow Obama to raise the debt limit without a prior vote by lawmakers. That plan was likely to include limits on spending across thousands of government programs, and possibly a down payment on cuts, as well.
As part of that proposal, a panel of lawmakers would recommend cuts in benefits programs by the end of the year, with the House and Senate required to vote yes-or-no on the package without possibility of changes.
“If they show me a serious plan I’m ready to move,” declared Obama at his second news conference of the week, even though he said he wanted a far more sweeping deal that might even have raised the age of Medicare eligibility from 65 to 67 if Republicans would increase selected taxes.
“We are obviously running out of time,” he said.
Numerous officials have cautioned that a default will occur if the debt limit is not increased by Aug. 2, warning also of a calamitous effect on an economy struggling to recover from the worst recession in decades.
“Now the debate will move from a room in the White House to the House and Senate floors,” said Senate Republican leader Mitch McConnell, indicating that the daily closed-door negotiations at the White House were a thing of the past.
The House Republican rank and file were advised in a GOP meeting that, barring action by Congress, the government would be able to pay only about half its bills after Aug. 2, and separately that a default could cost the government trillions of dollars in the form of higher interest rates on the debt.
“No matter what 50 percent you choose to pay, there are things in that 50 percent you don’t pay that would have really severe consequences,” Rep. John Campbell, R-Calif., said afterward.
“There are people out there who keep saying we don’t need to increase the debt limit at all. I think this was a way of saying, the people who are saying that need to look at the practical consequences of what they are saying.”
Rep. Paul Ryan, of Wisconsin, chairman of the House Budget Committee, told reporters after the meeting he had discussed the additional costs generated by a default _ an event that would be likely to raise interest rates no fax cash advance.
At his news conference, Obama said that would mean “effectively a tax increase on everybody” by affecting car purchasers, students and businesses.
The second White House news conference in a week was a testament to the overriding political and economic significance of the issue that has convulsed Congress as well as the administration.
Urging lawmakers to cut trillions from deficits at the same time they raise the debt limit, the president said he favored a balanced approach that included spending cuts, changes to huge government benefit programs and higher taxes on wealthy individuals and certain industries.
It was an offer Republicans could _ and did _ refuse.
“There are going to be no tax hikes because tax hikes destroy jobs,” said House Speaker John Boehner of Ohio.
While Boehner had earlier shown some flexibility on closing tax loopholes as part of an unprecedented deal with Obama, many Republican lawmakers are adamant that deficit reductions be limited to spending cuts.
To underscore their conservative priorities, GOP leaders scheduled a vote for next week on legislation they said would cut $111 billion in the budget year that begins Oct. 1. It would also require a steady decline in spending as a percentage of the overall economy over the next decade.
Even some supporters conceded it was a symbolic gesture given the realities of divided government.
“I think everybody knows the president won’t sign this,” Campbell said after the closed-door Republican meeting.
“But we’re putting a marker down, and that’s an important step that begins the process of resolving this,” he added.
If so, it was in a style that only congressional insiders might recognize as the beginning of the endgame to an unprecedented problem.
McConnell issued a statement announcing the Senate would vote on both a balanced budget amendment and the House’s “Cut, Cap and Balance Plan.”
His statement didn’t say so, but neither measure has much, if any, chance of passage in the Democratic-controlled Senate.
Still, the votes themselves would clear the way for debate on the fallback plan the two Senate leaders have been working on for the past several days.
Senate aides said the measure was not yet fully drafted, but likely to come up for debate by the end of next week.
A two-thirds vote of each house is required for passage of a constitutional amendment. Approval would send the issue to the states, where ratification by three quarters of the legislatures is needed to make it part of the Constitution.
Presidents play no official role in amending the Constitution, but Obama expressed his opposition to the GOP-backed measure anyway.
“We don’t need a constitutional amendment to do that. What we need to do is do our jobs,” he said.
A bomb hidden under a parked car exploded near Muslim pilgrims Friday, killing at least two and wounding four as they made their way to an annual Shiite religious festival in a holy city south of Iraq’s capital.
Pilgrims are an easy target for insurgents looking to stoke sectarian violence as U.S. troops prepare to depart Iraq by the end of the year.
Friday’s bomb exploded in a parking lot about 14 miles (22 kilometers) from the holy city of Karbala, where thousands of pilgrims are flocking this weekend for the annual Shiite festival of Shabaniyah.
The blast ignited five nearby cars, causing a second explosion when a gas tank caught fire, said Maj. Gen. Othman al-Ghanimy, commander of Karbala military operations. Two pilgrims were killed and four wounded, he said.
Karbala provincial councilman Hussein Shadhan al-Aboudi put the toll at three dead and 28 injured.
The weekend’s religious festival celebrates the birth of Mohammed al-Mahdi, the twelfth and so-called hidden imam, who disappeared in the ninth century. It is always held in the Islamic month before the Muslim fasting month Ramadan which this year falls in August.
Also Friday, a roadside bomb targeted a police patrol in Baghdad’s southern Dora neighborhood, killing one passer-by and wounding three instant credit reports.
With Iraq still plagued by widespread violence, Washington and Baghdad are considering keeping as many as 10,000 U.S. forces in Iraq beyond a year-end departure deadline. In excepts from an interview to air Friday night, Prime Minister Nouri al-Maliki repeated his long-standing offer for a small number of American military trainers to stay and help Iraq’s fledgling security forces.
Both nations are moving toward a troops withdrawal.
On Friday, officials said the last 10 Iraqi detainees in U.S. military custody are about to be turned over to Iraqi authorities.
Justice Ministry spokesman Haider al-Saadi said nearly 200 inmates were transferred to Iraq’s custody earlier this week. They were among the last inmates to be held by the U.S. and included some top allies and relatives of former dictator Saddam Hussein.
The handover of the prisoners is the final step by the U.S. to relinquish control of Camp Cropper on Baghdad’s western outskirts.
The process began a year ago, but since has been marred by high-profile escapes by some of its inmates.
Shares in British Sky Broadcasting PLC are falling for the sixth straight session Tuesday, a day after News Corp.’s bid for the satellite broadcaster was referred to the competition regulator.
With the review likely to take many months, there’s little incentive for short-term investors, such as hedge funds, to keep hold of the stock. BSkyB shares were 2.1 percent lower early Tuesday at 700 pence ($11.07). The decline means that the stock is underperforming in the FTSE 100 index of leading British shares. Shares around the world have been hit Tuesday by mounting fears over the financial health of Spain and Italy.
BSkyB shares have taken a battering over the past week, falling from 850 pence, as a phone-hacking at the Sunday tabloid News of the World escalated.
The paper, which closed Sunday after 168 years, was owned by News Corp.’s British subsidiary News International. News Corp. shares have also taken a pounding, as investors doubt whether it will get the 61 percent of BSkyB it doesn’t already own.
On Monday, News Corp. withdrew its promise to spin off Sky News, which had been a condition for buying the remaining shares in BSkyB, triggering a referral to the Competition Commission from Culture Secretary Jeremy Hunt.
Britain’s Competition Commission now must hold a full-scale inquiry into whether the takeover would break anti-monopoly laws. These inquiries usually take six months and Murdoch must be hoping that the current febrile atmosphere surrounding the bid cools down.
“News Corp. now has a decent time for the crescendo of allegations to peak and be dealt with and relevant actions to be taken, assuming these are containable,” Investec Securities analyst Steve Liechti said.
However, with police apparently still in the early stages of a criminal investigation of the News of the World, Liechti said there is a danger that News Corp. could be forced to reduce its stake in BSkyB if Britain’s communication regulator decides it is not “fit and proper” to control a broadcasting license.
On Tuesday, former Prime Minister Gordon Brown joined the criticism of News International, repeatedly accusing the company of employing criminals to obtain confidential information about his bank account, taxes and other issues.
“If I, with all the protection and all the defenses and all the security that a chancellor of the exchequer or a prime minister, am so vulnerable to unscrupulous tactics, to unlawful tactics, methods that have been used in the way we have found, what about the ordinary citizen?” Brown said in an interview with the BBC.
A unique initiative to improve labour relations at auto parts giant Magna International is fizzling.
Aurora-based Magna and the Canadian Auto Workers say they continue talking about expanding the
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Investors largely put aside their concerns about the Greek financial crisis Monday and focused instead on value. Stocks rose broadly after the market shook off its longest weekly losing streak in nearly a decade.
The downturn brought the S&P 500 close to its average level over the prior 200 days. So long as the index doesn’t sink far below that level, many technical traders see it as a sign to start buying stocks again. The S&P is now 6 percent below the 2011 high it reached on April 29.
“In the short term, stocks have been oversold, and you’re going to get some sort of bounce, whether justified or not, just for technical reasons,” said Paul Simon, chief investment officer for Tactical Allocation Group, which has $1.5 billion in assets under advisement.
The S&P 500 index rose 6.86 points, 0.5 percent, to close at 1,278.36. The Dow Jones industrial average added 76.02 points, or 0.6 percent, to 12,080.38. The Nasdaq composite gained 13.18, or 0.5 percent, to 2,629.66.
Health care companies like Aetna Inc. and Humana Inc. rose 1 percent, the largest gain among the 10 industry groups that make up the S&P 500 index. Financial companies like Morgan Stanley, which lost 1.9 percent, were the only group to lose ground.
The S&P 500 notched its third straight day of gains, the longest stretch of increases in the stock market for nearly a month. The index eked out a tiny gain last week, breaking a six-week losing streak driven by concerns that U.S. economic growth would falter in the second half of the year and that Greece’s debt crisis would spread. It was the S&P’s longest slide since 2002.
Signs that the European financial crisis may be contained helped ease investors’ concerns. European Union officials in Luxemburg said Monday that the EU would take steps to prevent Greece’s debt problems from affecting other struggling countries like Ireland and Portugal.
European leaders failed over the weekend to agree on releasing more financial aid to Greece, saying the country must first agree to more budget cuts. Greece’s recent efforts to slash spending have led to street protests and political turmoil in Athens. The Greek government faces a confidence vote on Tuesday.
Prime Minister George Papandreou’s newly-reshuffled government is expected to prevail in the vote, and officials say they expect Greece to get its next installment of emergency loans in July. If Greece were to default, it could trigger losses for the banks that hold Greek bonds and more turmoil in financial markets.
Some analysts say investors are ready to move beyond the Greek crisis and focus on corporate earnings and the U.S. economy.
“There’s a little fatigue about hearing about the same problems, and there’s no shock factor anymore,” said Oliver Pursche, president of Gary Goldberg Financial Services. Traders are now starting to look ahead to the Federal Reserve’s two-day policy meeting, which begins Tuesday, and the next round of corporate earnings reports that begin in July, he said.
Analysts expect that operating earnings per share for companies in the S&P 500 index rose 14 percent in the second quarter. They also expect the Fed to keep interest rates at nearly zero, a record low.
Among U.S. companies, PNC Financial Services Group Inc. fell 2 percent after saying it would buy the U.S. retail operations of Royal Bank of Canada for $3.45 billion. The deal will make PNC the fifth biggest U.S. bank with 2,870 branches.
Whole Foods Market Inc. gained 2.2 percent after a BMO Capital Markets analyst upgraded the stock following a recent sell-off. And Wal-Mart stores Inc. rose 0.4 percent after the Supreme Court blocked a sex discrimination lawsuit brought against the retailer by a large group of female employees.
Two stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume came to 3.1 billion shares.
South Carolina Gov. Nikki Haley and other Republican governors are calling on the National Labor Relations Board to dismiss its complaint against Boeing.
Haley and 15 other GOP governors wrote to the board’s general counsel, Lafe Solomon, on Thursday saying the probe hamstrings governors who are trying to create jobs.
The letter was released Friday as the U.S. House Committee on Oversight and Government Reform held a hearing in North Charleston on the complaint.
The labor board alleges Boeing built an assembly line for its new 787 aircraft in South Carolina to avoid unionized workers in Washington state. Boeing has challenged the complaint, saying no union workers lost jobs.
Haley and Solomon are scheduled to testify during the hearing.
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