White House signals possible opening on debt ceiling

Senior White House Correspondent

WASHINGTON (CNN) — Is it a glimmer of hope, or more rhetoric as the deadline for possible government default gets closer?

After weeks of near silence without any hint of a potential compromise between the Obama administration and congressional Republicans over raising the nation’s debt ceiling, the White House may be offering some conciliatory language that could help lead to a deal to prevent a potential default on October 17.

As recently as Friday, White House officials declined to specify any demand for the length of a deal to increase the nation’s debt ceiling.

Then on Monday, a White House official said it was up to Congress to decide how long the debt ceiling increase should last.

“It is up to Congress to pass a debt limit increase, and up to them for how long and when they want to deal with this again,” the official told CNN. “We have been super clear we think longer is better because it lends more certainty.”

The reference to the length of a debt ceiling deal caused speculation that the White House might be signaling flexibility on the issue to legislators.

However, President Barack Obama reiterated Monday that he will not negotiate with Congress while the country was under threat of a possible debt default.

“We’re not going to establish that pattern,” Obama said, adding that “we’re not going to negotiate under the threat of a prolonged shutdown until Republicans get 100% of what they want” or under the threat of “economic catastrophe.”

At the White House, spokesman Jay Carney later told reporters that “I’m not ruling out” a debt ceiling increase of any particular length of time, but that he believed a longer one was better because it would provide certainty after what Obama characterized as “manufactured crises” over similar brinksmanship in recent years.

With parts of the government shut down for a week and counting, the focus of ending a deepening political stalemate is shifting to the upcoming deadline to increase how much money the federal government can borrow.

Economists warn of dire fiscal impacts from failing to raise what is called the debt ceiling, such as a reduced U.S. credit rating that would spike borrowing costs. The economic blow and questions about America’s fiscal fidelity could bring a global slowdown, Obama has warned.

Analysts blamed concerns over the political impasse for another down day on Wall Street. All three major stock indexes fell with the Dow Jones Industrial Average losing 136 points, or nearly 1 percent.

House Speaker John Boehner said Sunday there will be no debt limit increase and no end to the partial government shutdown that began October 1, unless Obama and Senate Democrats negotiate a broader agreement with House Republicans.

On Monday, he repeated his accusation that Obama was refusing to hold talks with Republicans, even with the looming threat of a default.

“The American people expect that when their leaders have differences and we are in a time of crisis that we will sit down and at least have a conversation,” Boehner said, adding that “it is time to have that conversation before our economy is put further at risk.”

Senate Republican leader Mitch McConnell later said divided government means the two parties have to negotiate solutions.

“Until Senate Democrats accept that reality, these crises will only be harder to resolve,” McConnell said.

However, one of Obama’s top economic advisers, Gene Sperling, told a Politico breakfast on Monday that “the era of threatening default has to be over.”

“If you sanction through negotiation the legitimacy of somebody threatening default, then that is going to happen over and over again,” Sperling said. “So sanctioning negotiations with someone threatening default is not going to end the risk of default. It is likely to increase the chances that we as a country eventually default or even perpetually threaten our full faith and credit.”

At issue is how to reach an agreement to fund the government in the newly started fiscal year and raise the $16.7 trillion debt limit.

Conservative Republicans intent on shrinking the government while trying to weaken Obamacare demand that any agreement on funding for the newly started fiscal year and raising the debt limit include their priorities.

Boehner insisted that a deal to raise the debt ceiling must include deficit reduction steps that would lower costs of entitlement programs such as Medicare, Medicaid and Social Security.

However, he appeared to move away from the demand of the tea party conservative wing of his GOP caucus to dismantle or defund Obama’s signature health care reforms passed by Democrats in 2010 and upheld by the Supreme Court last year.

“My goal here is to have a serious conversation about those things that are driving the deficit and driving the debt up,” Boehner said, noting that the retirement of the “baby boomer” generation will strain Social Security and Medicare beyond the breaking point if no remedial steps get taken.

“It is time to deal with America’s problems,” he said. “How can you raise the debt limit and do nothing about the underlying problem?”

Obama and Democratic leaders in Congress insist that such congressional responsibilities — to keep the government running and able to pay its debts — must be free of partisan political pressure to avoid the kind of collateral damage happening in the current stalemate.

They want what are known as “clean” measures to fund the government for a short period and increase the debt limit, with no accompanying provisions involving contentious deficit reduction measures or GOP efforts to weaken Obamacare.

Once such measures are passed, they say, negotiations can take place on a full budget for fiscal year 2014 that began on October 1 and other issues such as reducing spending on entitlement programs like Medicare, Medicaid and Social Security.

Last week, a House Republican said on condition of not being identified that Boehner told GOP colleagues in private meetings he would not allow a government default to occur.

Boehner sounded more combative on Sunday, saying Obama and Senate Democrats refused to negotiate on either a spending plan to end the shutdown or the debt ceiling.

Senate Democrats are expected this week to take up a debt ceiling bill that would not propose any policy changes or spending cuts demanded by Republicans, according to a Senate Democratic leadership aide.

The aide said Senate Majority Leader Harry Reid could introduce a “clean” bill as early as Monday that could bring a first key procedural vote on Friday.

On the shutdown, Boehner insisted Obama and Democrats were wrong in saying a “clean” short-term spending plan to reopen the government would pass in the House with support from some Republicans and most Democrats.

“There are not the votes in the House to pass a clean CR,” Boehner said.

Obama rejected Boehner’s contention on Monday, saying the speaker “should prove it” by holding the vote.

“My very strong suspicion is there are enough votes there,” Obama said, adding that Boehner “apparently doesn’t want to see the government shutdown end … unless he’s able to extract concessions that don’t have anything to do with the budget.”

In the Senate, Majority Leader Harry Reid challenged Boehner to hold a House vote on the Senate version of the spending plan that would end the partial government shutdown.

“Are you afraid this measure will pass, the government will re-open and Americans will realize you took the country hostage for no apparent reason?” Reid said.

Both Obama and Reid said Democrats were open to negotiate “anything,” with the president specifically mentioning health care, once the government shutdown ends and the debt ceiling gets increased.

House Republicans, however, fear losing their leverage in any talks by giving up those two points without any concessions.

In a new national poll released Monday, most respondents said the government shutdown was causing a crisis or major problems for the country.

While the CNN/ORC International survey also indicated that slightly more people were angry at Republicans than Democrats or Obama for the shutdown, both sides were taking a hit.

According to the poll conducted over the weekend, 63% of respondents said they were angry at the Republicans for the way they have handled the shutdown while 57% expressed anger at Democrats and 53% at Obama.

“It looks like there is more than enough blame to go around and both parties are being hurt by the shutdown,” said CNN Polling Director Keating Holland.

Meanwhile, Treasury Secretary Jack Lew said on CNN’s “State of the Union” that the government risks more than its credit rating if the debt ceiling is not increased by October 17. He dismissed suggestions that the government could avoid default by making only interest payments, saying Social Security payments and veteran’s benefits could be endangered.

“It’s very dangerous, it’s reckless,” Lew said.

If Congress fails to raise the debt ceiling, borrowing money to meet the nation’s obligations won’t be possible, CNNMoney’s Jeanne Sahadi reported Monday.

Instead, Sahadi reported, lawmakers would have four options to choose from that would have to be implemented right away — cut government spending for the military and other discretionary programs by up to 33% every month; cut mandatory spending such as entitlement programs by 16% every month, and raising taxes by up to 12% every month.

CNN’s David Simpson, Tom Cohen and Brianna Keilar contributed to this report.