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U.S., GOP pushed to the brink of default

WASHINGTON — With the federal government on the brink of a default, a House Republican effort to end the shutdown and extend the Treasury's borrowing authority collapsed Tuesday night as a major credit agency warned that the United States was on the verge of a costly ratings downgrade.

After the failure of the House Republican leadership to find enough support for its latest proposal to end the fiscal crisis, the Senate's Democratic and Republican leaders immediately restarted negotiations to find a bipartisan path forward.

Sen. Harry Reid of Nevada, the majority leader, was optimistic that an agreement was within reach with Sen. Mitch McConnell of Kentucky, the Republican leader, the New York Times reported, citing a spokesman for Reid.

With so little time left, chances rose that a resolution would not be approved by Congress and sent to President Barack Obama before Thursday, when the government is left with only its cash on hand to pay the nation's bills.

"It's very, very serious," warned Sen. John McCain, R-Ariz. "Republicans have to understand we have lost this battle, as I predicted weeks ago that we would not be able to win because we were demanding something that was not achievable."

A day that was supposed to bring Washington to the edge of resolving the fiscal showdown instead seemed to bring chaos and retrenching.

House Speaker John Boehner, R-Ohio, and his leadership team failed in repeated, daylong attempts to bring their troops behind any bill that would reopen the government and extend the Treasury's debt limit on terms significantly reduced from their original push against funding for the health care law.

The House's hard-core conservatives and some more pragmatic Republicans were nearing open revolt, and the leadership was forced twice to back away from proposals it had floated, the second time sending lawmakers home for the night to await a decision on how to proceed today.

"We're trying to find a way through it," said Rep. Greg Walden of Oregon, the chairman of the National Republican Congressional Committee, emerging from Boehner's office to announce that no votes would be held Tuesday night.

The House setback returned the focus to the Senate, where the leadership had suspended talks after the Senate Republican leadership opted to give the House a chance to produce an alternative to the Senate measure taking shape.

Under the emerging Senate deal, the government would be funded through Jan. 15 and the debt limit extended until Feb. 7. House and Senate negotiators would be required to reach accord on a detailed tax-and-spending blueprint for the next decade by Dec. 13. A proposal to delay the imposition of a tax on medical devices had been dropped from the deal, as had a complicated tax on self-insured unions and businesses participating in the health care exchanges. All that remained for Republicans was language tightening income verification for people seeking subsidies on the insurance exchanges, but that language was still being negotiated.

It remained unclear whether the Senate plan could pass the House or even whether Boehner would bring it forward for a vote. The hopes for a resolution by Thursday also appeared to rest with the senators who had begun the failed movement to tie any further government funding to the gutting of the Affordable Care Act: Ted Cruz, R-Texas, and Mike Lee, R-Utah.

If Reid and McConnell reach a final accord, Senate leaders expect to use a parliamentary maneuver that will allow the majority leader to move the deal to the Senate floor quickly today. With unanimous consent, a final vote would come the same day. But if Senate hard-liners object, the Senate would have to wait until Friday and then muster 60 votes to cut off debate. Further obstruction would mean that the final vote would happen Saturday, when the bill would go back to the House, where it would probably have to pass with overwhelming Democratic support and the votes of a minority of Republicans.

Given the progress that had been made in the Senate, congressional Democrats and officials at the White House criticized Boehner's move Tuesday as an attempt to sabotage the bipartisan Senate talks even as they seemed to be nearing an agreement.

In the midst of the turmoil, the credit rating agency Fitch put the United States on a "negative ratings watch," warning that congressional intransigence had put the full faith and credit of the government at risk.

The news came as the Treasury Department said it had only about $35 billion in cash on hand. It expects to run out of "extraordinary measures" to keep paying all of the government's bills on Thursday, at which point outgoing payments might exceed that cash, plus any revenues, on any day going forward.

As the United States nears default, investors have demanded more compensation for lending to the government, with yields on short-term debt spiking to their highest levels in years.

Fitch warned that Congress had not "raised the federal debt ceiling in a timely manner." It said it "continues to believe that the debt ceiling will be raised soon," but that "political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default."

U.S., GOP pushed to the brink of default 10/15/13 [Last modified: Wednesday, October 16, 2013 11:02am]
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