U.S. stocks rally on Republican House proposal to put off debt ceiling deadline for 6 weeks

10/10/2013 3:51 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

U.S. stocks have rallied hard today on hopes that the Republican House and the Democratic White House are moving toward ending the stalemate that threatens to push the U.S. into default on its debt and that has kept the government shut down. As of 3 p.m. New York time the Dow Jones Industrial Average was up 2.01% and the Standard & Poor’s 500 stock index was up 1.69%.

The plan floated today by the Republican leadership in the House would include a short-term increase in the U.S. debt ceiling for six weeks—until November 22—in exchange for negotiations with President Barack Obama over the government shut down. The government shutdown would remain in effect, as I read reports on the proposal.  (The House proposal would include a provision to the U.S. Treasury from taking extraordinary measures to postpone the day of reckoning on the debt ceiling beyond November 22. It’s not clear to me how that would be enforceable since the definition of “extraordinary” remains rather unclear in what is itself an extraordinary situation.)

If I can judge from yesterday’s op ed piece in the Wall Street Journal by Wisconsin Republican Representative Paul Ryan, the Republican position in those negotiations would include spending cuts and “reform” of Social Security and Medicare. Ryan’s position would seem to hew to the Republican refusal to consider any tax increases. Since President Obama has refused more spending cuts or changes to entitlement programs without tax increases, it’s not clear how negotiation would move forward.

House Republicans are scheduled to meet with the President at 4:35 p.m. Washington time today.

The White House through press secretary Jay Carney has repeated its position that the President would support a short-term increase in the debt ceiling if it came in a bill with no “partisan strings attached.” It’s not clear if the proposal from the House leadership fits that description

It’s also not clear that House Speaker John Boehner actually has the Republican votes in the House to deliver this deal. And then, of course, there’s the Senate effort to pass a clean debt ceiling increase that would be sent to the House. That effort has gotten more complicated with reports that Republican Senators John Cornyn of Texas and Susan Collins of Maine are at least considering amending any debt ceiling increase sent over by the House to include an end to the government shutdown.

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