US fiscal issues

CNC
Added On October 16, 2013

The US government shutdown went into its third week on Monday and with the debt ceiling deadline only 3 days away.

White House talks on raising the US debt limit before it expires this week have been delayed to allow lawmakers more time to hammer out a deal.

Fifteen days into the partial US government shutdown and just two days to go before the deadline to raise the U.S. borrowing limits, the debt ceiling or the US defaults on its financial obligations and it appears Senate leaders have come up with a possible deal that Republicans, Democrats and the president can accept.

SOUNDBITE(ENGLISH): BARACK OBAMA, US President
 "Look I think there’s been some progress on the Senate side with Republicans realizing its not tenable, it’s not smart, it’s not good for the American people to let American default.  there’s been some progress that were not going to bridge the differences between the parties all at once, so It doesn't make sense we use shutdown or threat of default in negotiations..."

In a statement, the white House said talks scheduled for Monday afternoon had been postponed to "allow leaders in the Senate time to continue making important progress towards a solution that raises the debt limit and reopens the government".

The meeting was not immediately rescheduled.

The negotiations between Obama and House Republicans stalled last week, as a GOP offer of six-week debt ceiling increase in exchange for broader fiscal talks was rejected by Obama, shifting the focus to the Democratic-controlled Senate.

As negotiations in Washington continue, financial analysts are trying to calm investors by explaining what a breach of the debt limit could actually look like.

SOUNDBITE (ENGLISH) WAYNE LIN, Legg Mason Chief Strategist Global Assets
“If you think about the US government as a business, the amount of money that they need to cover their debt payments, the US government, is a very small percentage of the overall money that it takes in terms of revenues and what not. So the key thing is, what are the things that they stop paying for, this whole issue of prioritizing of payments. I think what investors will look at is, the next day, if they do fail to raise the debt limit the next day will be about how to prioritize payments.”

The stock market was trading at low volume on Monday as it was a federal holiday in the United States.

Most investors are in a holding pattern and are still hoping for a last-minute breakthrough in Washington.