After another day of vigorous debate between the two main political parties in the U.S, the top Democrat and Republican in the U.S. Senate were said to be close to agreeing on a proposal to raise the debt limit. It has been suggested that a deal could be struck sometime today, with borrowing authority set to run out on Thursday. Early talks stalled after a roller coaster day that saw two separate legislative efforts in the House buried after it became apparent too many Republicans were rebelling against their leaders’ plans.
The current deal on the table would extend U.S. borrowing authority until February 7, although the Treasury Department would have tools to temporarily extend its borrowing capacity beyond that date if Congress failed to act early next year. This is fundamentally what Obama has wanted since day one, A straight-forward debt limit hike and government funding bill. Senate aides said the two leaders are looking at two possible ways of speeding the legislation through the chamber, which often can bog down for days with procedural hurdles.
Assuming the Senate succeeds, House Speaker John Boehner will have to decide whether to allow passage of a bill that many of his fellow Republicans might oppose, a decision that could impact the top Republican’s political future. Uncertainty over Washington’s ability to avert a default led Fitch Ratings to warn it could cut the sovereign credit rating of the United States from AAA. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.