Boehner says U.S. on path to default if Obama won't negotiate

Reuters

* House speaker says not enough votes to pass "clean"spending bill

* Treasury secretary describes default as "unthinkable"

* Government shutdown now in sixth day

* Pentagon to recall most of its furloughed civilianemployees

By Caren Bohan and Andy Sullivan

WASHINGTON, Oct 6 (Reuters) - Republican House Speaker JohnBoehner vowed on Sunday not to raise the U.S. debt ceilingwithout a "serious conversation" about what is driving the debt,while Democrats said it was irresponsible and reckless to raisethe possibility of a U.S. default.

"The nation's credit is at risk because of theadministration's refusal to sit down and have a conversation,"Boehner told ABC's "This Week," adding that there were notenough votes in the House of Representatives to pass a "clean"debt limit bill, without any conditions attached.

Asked if that meant the United States was headed towards adefault if President Barack Obama did not negotiate ahead of anOct. 17 deadline to raise the debt ceiling, Boehner said:"That's the path we're on."

The comments appeared to mark a hardening since late lastweek when Boehner was reported to have told Republicansprivately that he would work to avoid default, even if it meantrelying on the votes of Democrats, as he did in August 2011.

Republicans and Democrats also traded blame for a shutdownthat has brought much of the government to a standstill fornearly a week. With no end in sight, the battle over funding thegovernment has merged into the one over the debt ceiling.

Republicans have demanded that Democrats agree to delayimplementation of the Affordable Care Act, the landmark 2010 lawpopularly known as Obamacare, as part of any spending bill.

They have also been seeking measures to address the federalgovernment's long-term debt in exchange for raising its $16.7trillion debt limit. If the borrowing cap is not increased, theUnited States could go into default, with what officials andeconomists say would be seriously damaging consequences for theU.S. and global economies.

"I don't want the United States to default on its debt,"Boehner said. "But I'm not going to raise the debt limit withouta serious conversation about dealing with problems that aredriving the debt up. It would be irresponsible of me to dothis."

Treasury Secretary Jack Lew warned of serious consequencesif "the unthinkable" were to happen and the United Statesdefaulted. "It is irresponsible and it is reckless to take thatchance, which is why Congress needs to act," he told Fox News.

He told CNN: "On the 17th we run out of our ability toborrow, and Congress is playing with fire."

Senator Ted Cruz, who has been the standard-bearer forRepublican opposition to funding the government without measuresto undercut Obama's healthcare law, told CNN that Congressfrequently in the past had attached curbs on spending to votesto raise the debt ceiling.

On this occasion, he said, Republicans were looking forthree things before raising the debt ceiling: a significantstructural plan to reduce government spending, no new taxes, andmeasures to "mitigate the harm from Obamacare."

Democrats vow not to negotiate on the funding bill or thedebt ceiling, arguing that it is the job of Congress to pay itsbills.

MARKETS WARY

Concerns that the shutdown could trim economic growthcoupled with nervousness over a potential debt ceiling crisislater this month have weighed on stocks and pushed the U.S.dollar close to an eight-month low.

While selling has been orderly so far, investors expectvolatility to rise as the shutdown continues and the debtceiling deadline nears.

Democratic Senator Charles Schumer told ABC's "This Week" hedid not believe Boehner would let the nation go into default, asit would lead to chaos on financial markets, freeze lines ofcredit and cause a jump in interest rates.

"I believe Speaker Boehner will not do that when push comesto shove," Schumer said, adding that Boehner and Republicanswould be forced "sooner or later" to stand up to the "hardright" in their party and give in. "They will have to back off."

Obama and the Democrats say bills to fund the government andraise the debt ceiling could be resolved quickly if Boehnerpermitted votes on simple, no-strings-attached measures in theRepublican-controlled House.

Asked about reports that around 20 House Republicans havesaid they would join some 200 Democrats in voting for such abill - enough to pass it - Boehner told ABC that there were notenough votes in the chamber to pass such a bill.

White House spokesman Jay Carney said Boehner should provehe does not have the votes for a clean bill, known as a"continuing resolution," or CR, by putting a bill on the Housefloor. "The Speaker says there are 'not enough votes' to pass aclean CR? If he's right, why not prove it?" Carney said viaTwitter.

The Affordable Care Act aims to provide health insurance tomillions of Americans without coverage. Republicans argue it isa massive government intrusion into private medicine that willcause insurance premiums to skyrocket, put people out of workand eventually lead to socialized medicine.

The government shutdown started on Tuesday and initiallyidled as many as 800,000 federal workers, shuttering all butessential government operations.

The Pentagon said on Saturday it would recall the vastmajority of some 350,000 civilian Defense Department employeessent home during the shutdown. The announcement came asDemocrats and Republicans in the House agreed to pay allfurloughed employees retroactively once the government reopened.

NO MAGIC SOLUTION

In an interview on CNN, Lew repeatedly declined to say whatwould happen if Congress failed to raise the debt ceiling.

Some Republicans have argued that the U.S. government wouldbe able to continue to service its debt even if it did not haveenough money to pay all of its bills. Lew declined to saywhether that would be the case, but he argued that it would bejust as bad if it missed other obligations like Social Securitypension payments or Medicare payments to hospitals and doctors.

"There is no option that prevents us from being in defaultif we don't pay our bills," Lew told CNN's "State of the Union."

Lew said the Obama administration has determined thatlegally it does not have the authority to raise the debt ceilingon its own, as some Democratic lawmakers have suggested.

"There's a desire here for there to be some kind of a magicsolution. There's an easy solution: a majority in Congress woulddo the right thing if given a chance to open the government. Amajority in Congress would do the right thing if given a chanceto let us pay our bills."

While most House Republicans have remained firmly opposed toreopening the government without some changes to Obamacare,Republicans in Democratic-leaning states have been trying tobuild support for a revolt against that stance.

In an opinion piece on Sunday on local news websitePhilly.com, seven Republican House members from districts innortheastern states called for a measure to reopen thegovernment without conditions.

"The fight to stop Obamacare cannot continue with thegovernment shut down. That's why we support a short-term, cleanfunding bill to turn those lights back on," wrote the group,which included Representatives Charlie Dent of Pennsylvania andFrank LoBiondo of New Jersey.

The lawmakers also said they were talking with someDemocrats on a possible compromise plan that would involvereopening the government for six months while repealing themedical device tax, a provision of Obamacare that is unpopularwith Republicans and some Democrats.

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