WASHINGTON - Senate leaders began negotiations Saturday aimed at reopening federal agencies and avoiding a government default after every other effort to end Congress' impasse crumbled in the previous 48 hours.
Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., took over the talks, which had led nowhere in recent days. House Speaker John Boehner, R-Ohio, acknowledged early Saturday that his discussions with President Barack Obama had collapsed and that the Senate was the last hope to avert a financial disaster.
McConnell and Reid held an hourlong meeting in Reid's office with two close Senate allies and left the Capitol by midafternoon. Neither side reported any breakthrough by late Saturday.
During the fiscal crises that have gripped Capitol Hill in recent years, each resolution and compromise came after Senate leaders picked up the pieces of failed efforts between the White House and the House.
Saturday morning, Reid rejected a proposal by Sen. Susan Collins, R-Maine, and other rank-and-file Republicans with some Democratic input to raise the federal debt limit until Jan. 31 and fund federal agencies through the end of March. It also called for minor adjustments to the Affordable Care Act.
At an afternoon news conference, Reid said he wanted a shorter period for stopgap funding and a longer extension of the Treasury's borrowing authority. Reid particularly wants to scale back the deep automatic spending cuts known as the sequester, which were passed during the 2011 debt ceiling showdown and will take effect every January for the next decade, unless Congress amends them.
Sen. Dick Durbin of Illinois, the No. 2 Democrat in the Senate, called that issue "really the single biggest sticking point."
The slow-moving talks appeared to nix earlier hopes that at least an outline for a deal could be in place before the financial markets opened Monday, as some senior senators suggested when momentum seemed to be building toward the plan by Collins.
Senate Republicans - already stunned by Boehner's inability to pass anything in the House - grew furious about Reid's attempt to get relief from the sequester because they considered Collins' plan the fastest path to a deal.
"This thing has gotten to the point of a real crisis for the country, and everybody keeps changing their position based on politics," Sen. Lindsey Graham of South Carolina said after a long huddle on the Senate floor with McConnell and other Republicans.
It was a dramatic turnabout from Thursday morning, when Boehner's leadership team signaled that it would support increasing the debt ceiling until almost Thanksgiving with the only demand being that Obama negotiate over a broader budget framework in the interim. With pressure on the debt issue appearing to ease, financial markets staged their biggest rally in a month.
The president, however, rejected Boehner's offer because it did not address reopening the government, which has been closed for 13 days. Instead, the White House grew interested in the Senate talks over Collins' plan because of its longer debt-ceiling window. According to the administration, Treasury Secretary Jack Lew will run out of options after Thursday for juggling the nation's books, and by the end of the month, the Treasury will run out of cash to pay the government's bills.
Collins, along with GOP Sens. Kelly Ayotte of New Hampshire and Lisa Murkowski of Alaska, worked with Democrats to draw up a 23-page draft that would have ended the shutdown and funded federal agencies for six months at current spending levels. It would have left intact the sequestration cuts scheduled to hit Jan. 15 but would have given agency officials flexibility to decide where the reductions should occur.
In addition, the proposal would raise the debt limit through Jan. 31, setting up a path for the two sides to have broad budget talks to try to tackle the issues of taxes and entitlement reform.
In exchange, Republicans sought tweaks to Obama's Affordable Care Act, including a two-year delay of a 2.3 percent tax on medical devices that is unpopular in both parties.
Reid and McConnell met with two allies who had been working with Collins - Sens. Chuck Schumer, D-N.Y., and Lamar Alexander, R-Tenn. - when Reid rejected that plan but the Senate talks continued.
In a raucous meeting in the Capitol basement Saturday morning, Boehner told his Republican colleagues that talks between the House GOP and Obama had broken down. He and House Majority Leader Eric Cantor, R-Va., urged members to hold firm, several said, as McConnell and Reid worked on a deal.
"All eyes are now on the Senate," said Rep. Adam Kinzinger, R-Ill.