US debt plan fears hit world markets

The US House votes tonight on a plan to avert an American default, but conservatives in the Republican-dominated lower chamber, Senate Democrats and President Barack Obama were all lined up against the measure.

Fears that the deadlock won't be broken pushed global stock markets down yet another day as investors worried that a dysfunctional Congress might remain gridlocked past the Tuesday deadline to raise the debt limit. US stocks were falling all week but were buoyed today by positive unemployment news. European markets were down and Japan's Nikkei average fell almost 1.5 percent.



Without legislation in place by the deadline, the Obama administration says the Treasury will not be able to pay all the nation's bills, possibly triggering a default that could prove catastrophic for an economy still recovering from the worst recession since the 1930s Great Depression. That would have major global consequences for the world's increasingly interconnected economies.



Deciding whether to support Speaker John Boehner's plan to raise the government's cap on borrowing, known as the debt ceiling, in exchange for trillions of dollars in federal spending cuts has vexed newly empowered House Republicans more than any other question in the seven months since they assumed control of the lower chamber and promised to upend the old order in Washington.



Some in the conservative tea party movement that helped propel the Republican gains in the 2010 elections concluded that Boehner already had betrayed them by negotiating with Obama on possibly increasing government revenues — meaning taxes — as part of a debt deal. But others said he deserved more time to put things right.



Divisions inside the Republican caucus could tarnish the party's deficit-slashing brand and chances for victory in the 2012 elections, when Obama also faces re-election.



After weeks of wrangling, however, Boehner appeared to have made some progress with conservatives who were angry that the bill didn't cut spending enough.



"We're getting there," he said, ahead of tonight's scheduled vote. The bill had been hastily rewritten to force deeper spending cuts.



But some House conservatives still can't swallow the Boehner legislation.



First-term Rep. Joe Walsh told CBS television Thursday morning he didn't think the Boehner proposal or a rival plan offered by Senate Democratic Leader Harry Reid cut federal spending sufficiently.



"Right now, I can't," he said when asked if he would vote for the Boehner legislation, but the tea party-backed lawmaker said he was still thinking about it. Walsh said he doubted the importance of the deadline, saying "we've got plenty of revenues in August to service our debt."



Even if that were true, it doesn't take into account huge federal obligations for American pensioners who rely on Social Security payments each month, benefits to military veterans or businesses large and small that do work for the government.



The White House disparaged the Republican bill, and Reid in the Democratic-controlled upper chamber was even more emphatic. He called it a "big wet kiss for the right wing."



As the Senate convened Thursday Reid said: "Default will rock our financial system to its core."



The White House has threatened a veto, saying the bill does not meet Obama's demand for an increase in the debt limit large enough to prevent a rerun of the current crisis next year, in the heat of the 2012 election campaign.



Obama supports an alternative drafted by Reid that also cuts spending yet provides enough additional borrowing authority to tide the government over through 2012. The Senate measure does not include an increase in tax revenue, which had been a key Obama requirement until now.



But White House adviser David Plouffe signaled that a melding of the two bills could be the compromise that averts a crisis.



"What you're going to have to do is reconcile what's in Reid and Boehner, which is a lot of the things the president has talked about in terms of spending cuts he'd be willing to accept. And that's where the compromise is," Plouffe said in an interview on MSNBC.



Sen. Minority Leader Mitch McConnell said he did not believe Obama would follow through on his threat to veto the House measure.



"It's inconceivable to me that the president would actually follow through on this threat," McConnell, a Republican, said Thursday. "After all, the president's first responsibility is to do what's best for the country, not his re-election campaign. Same goes for the Senate Democrats."



McConnell accused Democrats of "playing with fire" in planning to block the Boehner proposal in the Senate.



While Boehner holds out hope that the Senate will pass his measure, a more likely outcome is a last-ditch effort to find a compromise.



In fact, Boehner's plan has enough in common with Reid's — including the establishment of a special congressional panel to recommend additional spending cuts this fall — that Reid hinted a compromise could be easy to pull together quickly.



"Magic things can happen here in Congress in a very short period of time under the right circumstances," Reid told reporters.

AP

News
The Banksy image in Folkestone before it was vandalised
people
Life and Style
tech

Sales of the tablet are set to fall again, say analysts

Sport
Louis van Gaal at the Hawthorns prior to Manchester United's game against West Brom
football

Follow the latest updates from the Monday night Premier League fixture

News
i100
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Bloom Time: Mira Sorvino
tvMira Sorvino on leaving movie roles for 'The Intruders'
News
Brian Harvey turned up at Downing Street today demanding to speak to the Prime Minister
news

Met Police confirm there was a 'minor disturbance' and that no-one was arrested

Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010
films

George Lucas criticises the major Hollywood film studios

Voices
Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'
voices

Does Chris Grayling realise what a vague concept he is dealing with?

Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

News
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)
news

Concerns raised phenomenon is threatening resort's image as a family destination

Life and Style
gaming

I Am Bread could actually be a challenging and nuanced title

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Year 5 Teacher

£80 - £140 per day: Randstad Education Leeds: Year 5 Teacher KS2 teaching job...

Software Developer

£35000 - £45000 Per Annum Pensions Scheme After 6 Months: Clearwater People So...

Systems Analyst / Business Analyst - Central London

£35000 - £37000 per annum + Benefits: Ashdown Group: Systems Analyst / Busines...

Senior Change Engineer (Network, Cisco, Juniper) £30k

£30000 - £35000 per annum + Benefits: Ampersand Consulting LLP: Senior Change ...

Day In a Page

Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

How We Met: Hugh Bonneville & Peter James

'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

Bill Granger's heavenly crab recipes

Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
Radamel Falcao: How faith and love drive the Colombian to glory

Radamel Falcao: How faith and love drive the Colombian to glory

After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

Terry Venables column

Premier League managers must not be allowed to dictate who plays and who does not play for England
The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

Michael Calvin's Inside Word

Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past