Jacquelyn Martin, Associated Press
WASHINGTON — Senate leaders are optimistic about forging an eleventh-hour bipartisan deal preventing a possible federal default and ending the partial government shutdown after Republican divisions forced GOP leaders to drop efforts to ram their own version through the House.
Pressured by the calendar, financial markets and public opinion polls, Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., were hoping to shake hands on an agreement Wednesday and, if possible, hold votes later in the day.
Driving their urgency were oft-repeated Obama administration warnings that the government would exhaust its borrowing authority Thursday and risk a federal default that could unhinge the world economy. Lawmakers feared that spooked financial markets would plunge unless a deal was at hand and that voters would take it out on incumbents in next year's congressional elections.
"People are so tired of this," President Barack Obama said Tuesday in an interview with Los Angeles TV station KMEX.
On Wall Street, stocks rose in early trading amid strong corporate earnings and traders hoped for a last-minute deal to avoid a U.S. government default. But rates on short-term U.S. government debt also rose as investors braced for the possibility that the borrowing limit wouldn't be raised in time for the U.S. to continue paying all its bills on time.
There were some dire warnings from the financial world a day after the Fitch credit rating agency said it was reviewing its AAA rating on U.S. government debt for possible downgrade.
John Chambers, chairman of Standard & Poor's Sovereign Debt Committee, told "CBS This Morning" on Wednesday that a U.S. government default on its debts would be "much worse than Lehman Brothers," the investment firm whose 2008 collapse led to the global financial crisis.
Billionaire investor Warren Buffett told CNBC he doesn't think the federal government will fail to pay its bills, but "if it does happen, it's a pure act of idiocy."
Rep. Steve King, R-Iowa, a tea party favorite, said he was not worried about the prospect of a U.S. default.
"We are going to service our debt," he told CNN. "But I am concerned about all the rhetoric around this ....I'm concerned that it will scare the markets."
Aides to Reid and McConnell said the two men had resumed talks, including a Tuesday night conversation, and were hopeful about striking an agreement that could pass both houses.
It was expected to mirror a deal the leaders had neared Monday. That agreement was described as extending the debt limit through Feb. 7, immediately reopening the government fully and keeping agencies running until Jan. 15 — leaving lawmakers clashing over the same disputes in the near future.
It also set a mid-December deadline for bipartisan budget negotiators to report on efforts to reach compromise on longer-term issues like spending cuts. And it likely would require the Obama administration to certify that it can verify the income of people who qualify for federal subsidies for medical insurance under the 2010 health care law.
But that emerging Senate pact was put on hold Tuesday, an extraordinary day that highlighted how unruly rank-and-file House Republicans can be, even when the stakes are high. Facing solid Democratic opposition, House Speaker John Boehner, R-Ohio, tried in vain to write legislation that would satisfy GOP lawmakers, especially conservatives.
Boehner crafted two versions of the bill, but neither made it to a House vote because both faced certain defeat. Working against him was word during the day from the influential group Heritage Action for America that his legislation was not conservative enough — a worrisome threat for many GOP lawmakers whose biggest electoral fears are of primary challenges from the right.
The last of Boehner's two bills had the same dates as the emerging Senate plan on the debt limit and shutdown.
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