U.S. stocks plunged yesterday as the U.S. federal government shutdown reached its 8th day with over four hundred thousand federal employees still waiting on the sidelines for Democrats and Republicans on Capitol Hill to negotiate over the budget impasse and raise the debt ceiling by October 17th.
The Dow fell for the 11th time in 14 trading sessions as investors are increasingly showing more unease over the way U.S. lawmakers are handling the government shutdown and the U.S. debt ceiling issue.
Republicans on Tuesday were willing to move away from their prior demand that a fiscal compromise with Democrats must contain a delay of the implementation of Obamacare by one year.
House Republicans voted to set up negotiations on the debt ceiling limit and other fiscal matters.
Republicans showed more openness to a short term debt ceiling hike of four to six weeks as long as President Obama agrees to negotiations during that period of time.
However, one complicating factor is President Obama’s condition about only negotiating with Republicans after the government is funded and the debt ceiling is raised without legislative strings attached.
President Obama held a news conference from the White House on Tuesday where he urged Republicans to pass a clean budget and end the government shutdown while sending out a conciliatory tone.
“So most Americans, Democrats and Republicans, agree that health care should not have anything to do with keeping our government open or paying our bills on time, which is why I will sit down and work with anyone of any party, not only to talk about the budget; I’ll talk about ways to improve the health care system” Obama said.
Later in the press conference, Obama clarified that raising the debt ceiling does not mean the national debt is being raised.
“And because it’s called raising the debt ceiling, I think a lot of Americans think it’s raising our debt. It is not raising our debt” Obama explained.
“This does not add a dime to our debt. It simply says you pay for what Congress has already authorized America to purchase, whether that’s the greatest military in the world or veterans’ benefits or Social Security” Obama added.
In reality, the federal deficit has shrunk to its lowest level since 2008, when President Obama was first elected and the financial crisis spread across the globe.
The U.S. deficit has dropped because of an improving U.S. economy, reduced federal spending, and higher taxes on the wealthy, according to the Congressional Budget Office.
House Speaker John Boehner spoke on the phone with President Obama on Tuesday and held a brief press conference in which he described his phone call as a “pleasant conversation” but “disappointing” because the president refused to negotiate.
Speaker Boehner made the case for further reducing government spending.
“We can’t raise the debt ceiling without doing something about what’s driving us to borrow more money and to live beyond our means. The idea that we should continue to spend money that we don’t have, and give the bill to our kids and our grandkids, would be wrong” Boehner added.
On Tuesday the Republican majority House of Representatives passed the Deficit Reduction and Economic Growth Working Group Act, a formal, bipartisan, House-Senate working group that has the appearance of the lackluster bipartisan Supercommittee which accomplished little following the debt ceiling debacle in 2011 and led to the “across the board” sequester cuts.
President Obama criticized the Deficit Reduction and Economic Growth Working Group Act after it was passed by Congress on Tuesday.
Stock futures are rising for Wednesday after it was revealed that President Obama will soon choose Janet Yellen to succeed Fed Chairman Ben Bernanke once he steps down on January 31st.
Obama will announce his nomination at the White House at 3 p.m. EST