Optimism starting to creep into debt crisis

WASHINGTON — New budget talks between top congressional Republicans and President Barack Obama made progress late Saturday, suddenly stirring optimism that a last-minute deal could be reached to avert a potential federal default that threatened significant economic and political consequences.

After a tense day of congressional floor fights and angry exchanges, Sen. Harry Reid, the majority leader, called off a planned showdown vote set for after midnight but said he would convene the Senate at noon Sunday for a vote an hour later. He said he wanted to give the new negotiations a chance to produce a plan to raise the federal debt limit in exchange for spending cuts and the creation of a new congressional committee that would try to assemble a long-range deficit-cutting proposal.

"There are many elements to be finalized and there is still a distance to go before an arrangement can be completed," said Reid, who just a few hours earlier had played down talk of any agreement. "But I believe we should give everyone as much room as possible to do their work."

Reid's announcement set off an almost audible sigh of relief on Capitol Hill, where lawmakers and their aides had been bracing for an overnight clash over the debt following a day that had seen a heated House vote and lawmakers trudging from office to office in search of an answer to the impasse.

The first indication off a softening of the hard lines that have marked weeks of partisan wrangling over the debt limit came in the afternoon when the two leading congressional Republicans announced that they had reopened fiscal talks with the White House and expected their last-ditch drive to produce a compromise.

Following the House's sharp rejection of a proposal by Reid to raise the debt limit and cut spending, Sen. Mitch McConnell of Kentucky, the Republican leader and a linchpin in efforts to reach a deal, said he and Speaker John A. Boehner were "now fully engaged" in efforts with the White House to find a resolution that would tie an increase in the debt limit to spending cuts and other conditions.

"I'm confident and optimistic that we're going to get an agreement in the very near future and resolve this crisis in the best interests of the American people," said McConnell, who noted he was personally talking to both Obama and Vice President Joe Biden, a favorite partner in past negotiations.

Boehner, who would have to steer a compromise through the House, said he based his confidence on the prospect of an agreement on the sense that "we're dealing with reasonable, responsible people who want this crisis to end as quickly as possible."