U.S.

Congress races against the clock as default looms

Partial government shutdown enters its 14th day as U.S. moves closer to a default that could damage its economy

Senate Majority Leader Harry Reid, D-Nev., is in ongoing meetings with Republicans to break the political deadlock.
Mark Wilson/Getty Images

The United States moved closer to a default that could damage the economy, and a partial government shutdown entered its 14th day Monday, as Democratic and Republican leaders in the Senate remained at odds in their last-ditch negotiations to end the fiscal crises gripping Washington.

Congress is racing against the clock, with Treasury Secretary Jack Lew warning that the U.S. will quickly exhaust its ability to pay its bills on Thursday. Christine Lagarde, the International Monetary Fund's managing director, spoke fearfully about the disruption and uncertainty, warning on Sunday of a "risk of tipping, yet again, into recession" after the fitful recovery from 2008.

The reaction of world markets and the Dow Jones on Monday could provide the necessary jolt to Senate leaders, who represent the last, best chance for a resolution after talks between President Barack Obama and Republican leaders of the House of Representatives collapsed. U.S. futures were down sharply Monday, with light trading as expected on a holiday. Earlier, trading in Asia was muted, with markets in Tokyo and Hong Kong closed for holidays.

At issue are two normally routine pieces of legislation that have become entangled in disputes over Obama's health-care overhaul, the Affordable Care Act (ACA), and overall government spending. Congress' failure to pass a bill temporarily funding the government led to the partial shutdown on Oct. 1, the first in 17 years. And if Congress does not approve a separate measure increasing the debt ceiling — the amount of money the federal government is allowed to borrow — the Obama administration says it will not be able to pay its bills, risking default.

Obama and Vice President Joe Biden are scheduled to meet with the two chambers' leaders from both parties on Monday to discuss possible solutions for the stalemate.

Click for the latest news and analysis on the government shutdown

Lawmakers expressed tentative optimism Sunday that fiscal-crisis talks between Senate leaders would prove fruitful, as Senate Majority Leader Harry Reid, D-Nev., met with Senate Minority Leader Mitch McConnell, R-Ky., and said Democrats would support government funding at current levels through Nov. 15.

"It's a breakthrough. Hard to imagine, but it's a breakthrough," Sen. Dick Durbin, D-Ill., told NBC's "Meet the Press." 

"The conversation that started yesterday between Sen. McConnell — the Republican Senate leader — and Sen. Reid I think has the promise of finding a solution," he said.

Though Reid and McConnell held an initial session on Saturday, it failed to dispel uncertainty about their ability to reach a quick agreement to end the shutdown and increase the nation's borrowing authority.

Durbin offered no concrete reason for optimism, stressing the dire consequences of failure and his hope that "sensible people prevail" in the crisis, which began on Oct. 1.

"I don't want to be overly optimistic, but there's a lot at stake," he said.

Ohio Republican Sen. Rob Portman said he also expected the two sides could reach a deal by Thursday.

Appearing on CNN's "State of the Union," Sens. Susan Collins, R-Maine, and Amy Klobuchar, D-Minn., agreed that a solution would likely be reached by Reid and McConnell before Thursday.

Among the parties' unresolved issues are the duration of the debt-ceiling increase and the level of spending Congress will approve when it finally agrees on a budget bill to reopen the government.

Republicans are demanding deficit reduction and spending cuts in exchange for reopening the government and extending its borrowing authority. President Barack Obama and other Democrats say they want both measures pushed through Congress without condition and would agree to deficit-reduction talks afterward.

After lawmakers failed to fund the government, they are scrambling to put hundreds of thousands of federal employees back to work. Since the shutdown began, the government has idled 350,000 government workers, left hundreds of thousands of others working without pay and curtailed everything from veterans' services to environmental inspections. The effects of the shutdown have reached businesses, such as concessions and hotels near federal parks, that depend on government programs.

'Disastrous impact'

Economists warn that a default could send shock waves throughout the U.S. and beyond.

Amid meetings in Washington of world finance officials Sunday, the International Monetary Fund's policy committee said the U.S. needed to take "urgent action" to address the impasse.

World Bank president Jim Yong Kim stressed the urgency for Washington policymakers to reach agreement on raising the debt ceiling before the deadline, saying the economic fallout of failing to act could include increased interest rates, slower global economic growth and falling business confidence. Such an outcome, he said, would have a "disastrous impact" on poor nations.

The pressure was on both parties but seemed mostly on Republicans, who, polls show, are bearing the brunt of voters' wrath over the standoff. And though the financial markets rebounded strongly late last week on word of movement in the talks, lawmakers of both parties were warily awaiting the reopening of negotiations this week.

Though the Senate was leading the search for a deal, the House of Representatives and its fractious Republicans remained a possible headache.

"I think at this point, we've got to figure out a way to get something out of the Senate that we think is close enough for the House to accept," Sen. Bob Corker, R-Tenn., said on "Fox News Sunday."

House Speaker John Boehner, R-Ohio, told Republican lawmakers early Saturday that his talks with the president had ground to a halt.

Also sidelined, at least for now, was a plan forged by Collins and a bipartisan coalition to briefly fund the government and raise the debt limit, currently $16.7 trillion, in exchange for steps like delaying the medical-device tax that helps fund the ACA.

Democrats said Collins' plan curbed spending too tightly, and Reid announced Saturday it was going nowhere.

Klobuchar and fellow senators Joe Donnelly, D-Ind.; Heidi Heitkamp, D-N.D.; Angus King, I-Maine; and Mark Pryor, D-Ark., and said in a statement that while they continue to negotiate with Collins and other GOP senators, they do not support the plan as now structured. "There are negotiations," the statement said, "but there is no agreement."

Senate Republicans dealt Democrats an expected setback on Saturday by derailing a Democratic measure extending the debt limit through 2014 without any conditions. The vote was 53-45 to start debating the Democratic measure — seven short of the 60 votes needed to overcome Republican obstruction tactics.

Obama met Saturday with Senate Democratic leaders at the White House after accusing Republicans of practicing the politics of extortion. "Manufacturing crises to extract massive concessions isn't how our democracy works, and we have to stop it," Obama said in his weekly radio and Internet address.

The president spoke Sunday with House Minority Leader Nancy Pelosi, D-Calif., and both stressed in a White House press release that Congress needed to pass a "clean" debt increase and continuing budget resolution — bills without additional cuts to government programs or changes to the ACA — before broader talks on a new federal budget could go forward.

Al Jazeera and wire services

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