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Warring parties face off again in bid to end U.S. fiscal crisis

U.S. House Speaker John Boehner (R-OH) arrives on Capitol Hill in Washington October 11, 2013.

Jason Reed/REUTERS

The warring factions in the U.S. fiscal stalemate are talking again Friday, inching closer to a deal that would end the 11-day-old crisis.

President Barack Obama, fresh from meetings Thursday with House Republicans, was heading into meetings with their Senate counterparts, fueling hopes of a resolution.

The House Republicans offered Thursday to raise the U.S. debt ceiling until late November, meaning the two sides would have breathing room for broader talks on cutting the deficit.

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The president rejected that because it would mean the partial shutdown of the federal government would continue.

But the fact that they were talking still sparked optimism, notably in financial markets, which surged Thursday on tentative signs of a truce.

Markets continued to gain Friday, though many analysts say a temporary lift to the debt limit only puts the problem over to a later date, likely around the U.S. Thanksgiving holiday.

"The general consensus is that a deal will be done, that it represents de facto capitulation by the Republicans as a result of voters 'blaming' them for the stalemate, and that the temporary deal will become permanent before Thanksgiving [in the United States]," said said Kit Juckes, the chief of foreign exchange at Société Générale.

Indeed, Thursday's talks came just before a Wall Street Journal/NBC News poll showing more people blaming the Republicans than the president for the crisis.

The markets may well have played a role in bringing the two sides to the bargaining table on fears that the two sides would not resolve their differences before a deadline of Oct. 17, which the Treasury Department says is a drop-dead date if it's to meet its obligations, to raise the debt limit.

This, in turn, brought concern over another debt downgrade and even a U.S. default.

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The interest rate the Treasury Department has to pay to get investors to buy one-month bills climbed this week, a signal of the impact.

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More


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