New talks aim to end US budget stand-off

It would provide funding to end the government shutdown and avert a potentially catastrophic default by increasing the federal debt limit so the government can pay its bills on time.

The proposal includes an easing of the deep across-the-board spending cuts that began taking effect earlier this year, and replacing them with curbs in benefit programmes that President Barack Obama himself has backed.

Among them is a plan to raise the cost of health care for the elderly for better-off beneficiaries.

Mr Boehner brought the proposal to Thursday’s White House meeting to extend federal borrowing authority and avoid default until November 22, conditioned on Mr Obama’s agreeing to negotiate over spending cuts and the government shutdown.

But participants said the discussion expanded to ways to quickly end the federal government shutdown, which entered its 11th day on Friday as Congress has failed to pass an emergency funding bill.

Congress, under US law, must approve an increase to the federal debt limit so the government can pay its bills.

Normally, this is routine, but Republicans had been insisting on cuts and changes to Mr Obama’s 2010 health care overhaul law and other programmes as the price for reopening government and extending the debt limit past next Thursday’s deadline.

Mr Boehner’s offer indicates some movement away from that strategy, but Republicans claimed victory on one front, noting that they were in negotiations with a president who had said repeatedly there would be none until the government was open and default prevented.

The speaker’s plan – and positive though unenthusiastic words about it from White House spokesman Jay Carney – seemed to spark a big day in the financial world.

The Dow Jones industrial average jumped 323 points, or 2.2%. European Central Bank head Mario Draghi said that while a US default would inflict “severe damage” on the global economy, the world believes Washington will “find a way out of this.”

A White House statement about Thursday’s meeting with House Republicans said “no specific determination was made” but added, “The president looks forward to making continued progress with members on both sides of the aisle.”

Mr Obama was holding a late morning White House meeting on Friday with Republican senators, who said they would present their own options for ending the shutdown and debt limit standoff.

One major problem for Mr Boehner’s plan was highlighted by Democratic Senate Majority Leader Harry Reid. After he and fellow Senate Democrats had their own White House meeting with Obama, Mr Reid said negotiations before the government reopens – a key part of Mr Boehner’s proposal – were “not going to happen.”

On Friday, Mr Reid rejected the notion of a six-week increase in the nation’s borrowing authority, pressing not only for a longer, 15-month measure but a reopening of the government.

The shutdown has idled 350,000 civil servants, prevented the Social Security Administration from revealing next year’s cost-of-living increase for recipients and curtailed many consumer safety inspections.

The Obama administration has warned that the government will exhaust its borrowing authority on October 17 and risk being unable to pay its bills and facing default.

House Republicans’ insistence on spending cuts and deficit reduction come with the 2013 budget shortfall expected to drop below $700bn after four years exceeding one trillion dollars annually.

But their insistence on cuts in the health care law as the price for reopening government has frustrated many Senate Republicans, who see that battle as unwinnable.

That has prompted Republican Senate Minority Leader Mitch McConnell and other Republican senators to seek their own possible resolution to the shutdown and debt limit fights.

“Let’s put this hysterical talk of default behind us and instead start talking about finding solutions to the problems,” Mr McConnell said at the start of the Senate session on Friday, shortly before the White House meeting.