(BN) Republicans Back Short-Term Debt-Limit Agreement, Risking Veto From Obama

This is like watching a car crash in slow motion, before the event happens. This is beyond preposterous. The Republicans want to put Obama in a dammed if he does and dammed if he doesn’t situation. By passing a smaller limit increase and forcing Obama to revisit the debt ceiling again in an election year they seem to feel that they put Obama in a compromising position. If Obama passes the measure he is neither acting in the best interest of the country or his own politics and markets likely tumble on the poor result and immovable will for the US to get on the right path. If he vetoes the measure as he has said he would, he risks falling on the sward for a default scenario. The republican plan serves absolutely no interests except their misguided perception that the GOP wins a stalemate either way and maybe improves their chance in the White House in 2012. I believe Americans are smart enough to see this and blame all bad outcomes on the Tea Party and a fragmented GOP. The result of a default scenario will only strengthen Obamas power with voters and ultimately help pass a more democratic agenda. The question is whether he is willing to let the clock run down to prove this point. I can’t see any reason why the US will avoid a downgrade by at least one rating agency. Regardless of the outcome here, that is what the stakes are for and sadly no one in Washington gets it.

Our political system is now officially broken and in dire need of a reboot.

Boehner Pressing Ahead With Short-Term Debt Limit Increase

July 24 (Bloomberg) — House Speaker John Boehner plans to press ahead with a shorter-term increase in the U.S. debt limit than President Barack Obama has requested, he told lawmakers today, defying a veto threat and signaling continued stalemate in the U.S. Congress as time runs short for a deal.

Boehner told rank-and-file Republicans during a conference call this afternoon that they needed to pull together as a team to block Obama, who has asked for a $2.4 trillion borrowing boost in the $14.3 trillion debt ceiling, from obtaining the money all at once, without any guarantees of spending cuts. His remarks were described on condition of anonymity by a person familiar with the discussion.

The speaker said that no one is willing to default on the full faith and credit of the U.S., according to the person.

The comments indicated that Boehner plans to force action on his plan to provide only a temporary borrowing boost of about $1 trillion accompanied by spending cuts of at least as much, tying the remainder of the debt-ceiling increase Obama has requested to further cuts in the future. The White House says Obama would veto such a measure.

U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will slump after rallying within 1.4 percent of a three-year high, as failure to raise the federal debt limit intensified concern of a default.

The contract on the S&P 500 Index expiring in September declined 1.2 percent to 1,325.50 at 7:01 a.m. in Tokyo. The U.S. dollar fell against the euro, yen and Swiss franc.

Upfront Authority

Boehner told Republicans Obama wants the borrowing authority all upfront so lawmakers don’t have to deal with this again until after the next election, the person familiar with the comments said. To stop him, Boehner said, Republicans need a vehicle that can pass in both houses. Speaking to a group that includes a large proportion of Tea Party-backed freshmen intent on slashing spending, Boehner said the path forward might require some of them to make sacrifices to maximize their leverage.

Yesterday, Boehner told his members that he wanted to send markets a positive sign by the time Asian markets began opening this afternoon that Congress would strike a deal to break the impasse over raising the $14.3 trillion borrowing limit.

With no evidence that such compromise has been reached, President Barack Obama is meeting at the White House with Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi.

The dollar weakened to $1.4390 per euro as of 6:01 a.m. in Tokyo from $1.4360 in New York at the end of last week. The greenback fell to 78.35 yen, and touched a four-month low of 78.12 yen, from 78.54 on July 22. It fetched 81.17 Swiss centimes from 81.92 last week after reaching a record low 80.33 on July 18. The yen traded at 112.75 per euro from 112.77.

To contact the reporter on this story: Julie Hirschfeld Davis in Washington at or Jdavis159 .

To contact the editor responsible for this story: Mark Silva at msilva

Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/

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