U.S. faces debt ceiling crash at stroke of midnight

WASHINGTON (CNN) — The country crashes into the debt ceiling at midnight, and there is no deal yet in Washington.

The deal-making resumes Wednesday, as the government slides into day 16 of the shutdown.

Legislators dropped hints on their way home Tuesday that Senate leaders will present a deal to raise the debt ceiling and reopen the partially shuttered government.

And a Republican member of the House of Representatives is holding out hope that Speaker John Boehner could break with a Republican tradition to put that deal on a fast track.

After adjourning the Senate for the night around 10 p.m. Tuesday, Majority Leader Harry Reid sounded upbeat. “We’re in good shape,” the Nevada Democrat said.

Senate staffers burned midnight oil to draft a framework bill, and a spokesman for Reid said he and his counterpart, Senate Minority Leader Mitch McConnell, “are optimistic that an agreement is within reach.”

The Senate isn’t in session until noon Wednesday, but it’s possible that statements may go out in the morning in an effort to assure the markets of progress.

Slow process

Even so, it could take a day or two more for a deal to make it through the legislative process, longer than it will take for the debt ceiling to come grinding down, halting legal permission for the government to borrow money.

If a new bill hits walls, as in the past, it could take even longer, pushing the U.S. into its first-ever debt default.

The prospect of the U.S. government not meeting its debt obligations has economists around the world prophesying dire consequences. Mutual funds, which are not allowed to hold defaulted securities, may have to dump masses of U.S. treasuries.

Ratings agency Fitch fired a warning shot Tuesday that it may downgrade the country’s AAA credit rating to AA+ over the political brinksmanship and bickering in Washington that have brought the government to this point.

That could help raise interest rates on U.S. debt, putting the country deeper into the red.

Rating agency Standard & Poor’s cut the U.S. credit rating from AAA to AA+ after the 2011 debt ceiling crisis. Moody’s still has the U.S. rated AAA.

Fast track

Boehner could put a Senate deal on a fast track, a Republican colleague told CNN’s Jake Tapper. But he’d have to make a bold political move to do so.

“I believe that John Boehner will likely be in a position, where he will have to essentially pass the bill that is negotiated between Sens. McConnell and Reid,” said Republican Rep. Charlie Dent of Pennsylvania.

Then Boehner could shoot it over to the Senate for its quick approval, and it could then lateral it to President Obama to sign.

But Boehner would probably have to break a Republican tradition, the Hastert Rule, to do that.

The informal tenet, named after former House Speaker Dennis Hastert, says that the House speaker does not introduce legislation unless a majority of Republicans say they will vote for it first.

It has served to keep proposals off the floor, even if they have the prospect of passing via the votes of Democrats combined with those of some moderate Republicans.

House Republicans have expected Boehner to uphold the rule, which asserts the party’s interests in the chamber, and he has pledged to do so.

A break from tradition

Dent hopes Boehner will make an exception and break the Hastert Rule to save the United States from a debt default, and he fears the speaker will have to, if he wants the necessary legislation to pass.

Although many of his House Republican colleagues support the potential Senate deal, some would vote against it for political reasons, Dent said.

“There will be fewer Republican members voting for the bill than who actually support it,” Dent told Tapper on the Capitol Hill lawn. “We’re going to be seeing a lot of what I would call ‘hope yes, vote no.’ “

That would leave it up to Democrats to pass it along with a contingency of Republicans like himself, provided Boehner puts it to a vote.

If he does, Dent will vote in favor of it alongside many House Democrats, and he thinks enough of his moderate Republican colleagues will join him to “put it over the top.”

“The question is, how many Republicans? Will it be closer to 20 or 75?” Dent said. “I don’t know. I hope I’m wrong.”

Dent says he feels that it is his basic duty to fund the government and keep it able to pay its debts. He says he believes that the majority of House Republicans feel the same way.

“The challenge is (that) there are two to three dozen members of the House Republican caucus that don’t share that,” he said. “It only takes two or three dozen to obstruct the will of the majority.”

Emergency brake?

Some scholars have suggested that the 14th Amendment to the Constitution gives Obama an emergency brake to stop the default by ignoring what Congress does and borrowing in spite of having reached the debt ceiling.

Section 4 of the amendment states: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Obama has rejected such claims, the Congressional Research Service has said. And other scholars say that by invoking the 14th Amendment in this way, the President would risk breaking other laws.

But the same scholars who say this say they believe that section 4 was formulated to keep politicians from holding the debt hostage in order to impose their political will on the nation.

Muddled plan

The House stumbled in an attempt to solve the problem Tuesday.

Sources said Tuesday that Boehner had been “struggling” to come up with enough votes in the GOP for it, even though the Ohio Republican himself said “the idea of default is wrong.”

The House proposal no longer attacks major parts of Obamacare but does prohibit federal subsidies to federal lawmakers and their staff receiving health insurance through Affordable Care Act programs.

The House proposal also would have forbidden the Treasury from taking what it calls extraordinary measures to prevent the federal government from defaulting as cash runs low, in effect requiring hard deadlines to extend the federal debt ceiling.

House Democrats have said they would not support the House funding proposal. And it is unpopular with some Republican representatives, who see no spending cuts in it.

“It just kicks the can down the road another six weeks or two months,” said Rep. Joe Barton, R-Texas.

There is no sign that it would receive the 217 votes necessary to pass the House.

Time running out

Obama will meet Wednesday with Treasury Secretary Jack Lew, who has been looking for creative ways to cover U.S. financial obligations as the debt ceiling comes down.

On Tuesday, Obama called for House Republicans to “do what’s right” by reopening government and ensuring the United States can pay its bills. “We don’t have a lot of time,” he said.

But he acknowledged Boehner’s difficulty in getting his fellow House Republicans on the same page.

“Negotiating with me isn’t necessarily good for the extreme faction in his caucus,” Obama said, referring to the tea party and its conservative allies.

“It weakens him, so there have been repeated situations where we have agreements. Then he goes back, and it turns out that he can’t control his caucus.”

According to multiple sources, the House plan would have called for funding the government through December 15 to end the partial shutdown. It also would have increased the federal debt ceiling until February 7.

This GOP plan may not yet be dead. As he left the Capitol, House Majority Leader Eric Cantor of Virginia said only that there would be “no votes tonight. We’ll see you in the morning.”

The rumored Senate proposal would give Republicans some concessions while being closer to what Obama and fellow Democrats have long pushed for regarding government funding and the debt ceiling.

None of the proposals so far has offered a grand bargain that would fund government and allow for borrowing for more than a few months.

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