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Debt talks in disarray

U.S. Speaker of the House Rep. John Boehner after a Republican conference meeting  on January 18, 2012 on Capitol Hill. After a weekend policy retreat in Virginia, on Friday, House Republicans proposed raising the debt ceiling for three months.

Parts of the Affordable Care Act have re-emerged as potential bargaining chips in Congressional efforts to reopen the government and increase the U.S. borrowing limit, though any potential deal would only accomplish those goals for a few months.

As markets closed today, lawmakers had yet to vote on any plans. The Dow Jones Industrial average fell 0.87 percent, while the Nasdaq was off 0.56 percent and the S & P 500 fell 0.71 percent.

Even with the jitters seen on Wall Street, analysts are still confident a deal will be struck.

“I think most economists and investors, in the back of their mind, assume that somehow the government will find a way to pay its bills,” said Dean Maki, the chief U.S. economist for Barclays.

One of the plans would fund the government until mid-January, the same time automatic spending cuts known as the sequester are set to increase. It sets up a new arena in the fight over spending, taxes, borrowing and long-term changes to entitlement programs.

The fight over sequester spending levels is “the biggest single stumbling block” in negotiations, said Steve Bell, a senior director for economic policy for the Bipartisan Policy Center.

The short-term nature of any potential deal makes it more difficult for businesses trying to make plans and invest for the longer term, Maki said, because firms can’t plan on government spending and sequester levels.

“We do see think there is some cost to the short-term deadlines that wouldn’t be there if there were a long-term agreement reached,” he said.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.
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