Debt crisis deepens as House vote postponed

WASHINGTON - US House Speaker John Boehner was forced to delay until Friday a vote on his plan to avert a potentially catastrophic US debt default, as he struggled to wrangle support for the measure from within his restive Republican caucus.

By (AFP)

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Published: Fri 29 Jul 2011, 12:27 PM

Last updated: Tue 7 Apr 2015, 4:40 AM

Boehner on Thursday faced stiffer than expected resistance from unruly conservative Tea Party lawmakers to pass the measure and Republicans were expected to wait a day to try again to hold a vote on it.

“No vote tonight,” a grim Majority Whip Kevin McCarthy told reporters following a a day of heated floor debate and intense intra-party haggling over the controversial measure.

Republicans’ futile efforts to keep their own members in line in his party’s showdown with President Barack Obama over raising the US debt ceiling have only deepened the crisis over attempts to reach a deal to avert a default by the world’s largest economy.

Boehner earlier Thursday met one by one with Republican lawmakers to shore up support for his two-step plan to raise the $14.3 trillion debt ceiling enough to avert default for at least six months.

But Republicans opposed to the measure dug in their heels.

Boehner is “asking for my vote,” said Congressman Louie Gohmert of Texas, as he emerged with his limbs intact after one arm-twisting session with the top House Republican.

“I’m still where I was before. I’m still bloodied-and-beaten ‘no,’” Gohmert declared.

Meanwhile, markets around the world remained on edge Friday, in fears that a fragile economic recovery nurtured since the 2008 global financial crisis could be at risk if the United States fails to reach a deal to avert a potentially cataclysmic debt default.

Even if the measure does eventually clear the House, Democrats have vowed to block it in the Senate in favor of their own plan, which in turn appeared certain to go down to defeat in the Republican-controlled House.

“We believe still, that in the end, and we’re getting near the end, but in the end cooler heads will prevail, sanity will prevail in the United States Congress and they will reach a compromise,” White House spokesman Jay Carney said on MSNBC television.

With only five days to go until an August 2 deadline when the Treasury says it will run out of funds, IMF chief Christine Lagarde piled on the pressure for a deal saying the dollar’s status could be in doubt if the impasse continues.

Stock markets also remained nervous with Asian stocks falling Friday.

Hong Kong fell 1.03 percent, Sydney lost 0.60 percent and Shanghai dipped 0.12 percent while Seoul was 0.22 percent lower and Taipei shed 0.77 percent.

Boehner admitted his plan was “not perfect,” but he said there were no “gimmicks or smoke screens.”

But Democrats have slammed Boehner’s plan which would raise the debt ceiling for just a few months, saying it would only plunge the world’s economic superpower back into crisis at the start of the 2012 presidential election year.

A majority of senators has warned they will block the bill if it reaches the Senate, and the White House has said President Obama would veto it if it reaches his desk.

“For the sake of jobs and for the sake of our country, I am asking the representatives in the House in a bipartisan way and asking my colleagues in the Senate, let’s pass this bill and end this crisis,” Boehner said.

Republican House Majority Leader Eric Cantor also appealed to Democrats, saying Senate Majority Leader Harry Reid had several choices.

“One is to suffer the economic consequences of default, which I hope, which all of us hope, he doesn’t choose,” Cantor said.

But Reid vowed that the Boehner proposal, which would shave $915 billion off the national deficit over 10 years in return for hiking the debt ceiling by some $900 billion, would fail in the Democratic-controlled Senate.

“No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now,” he said.

The US economy hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally.

The heads of Wall Street’s top banks, meanwhile, urged Obama and Congress to reach a deal, warning of “very grave” dangers if there is no accord.

The chief executives of Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo and other top financial firms wrote in a joint letter that they hoped for a deal this week.

“The consequences of inaction — for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America’s global economic leadership — would be very grave.”

Democrats have rallied behind a rival plan crafted by Reid which would cut spending by $2.2 trillion over 10 years, and raise the debt ceiling until after the November 2012 elections.

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