Senators seek budget deal, House effort flops

WASHINGTON (AP) — Senate leaders are optimistic about reaching an eleventh-hour bipartisan deal preventing a possible federal default and ending the partial government shutdown after Republican divisions forced House leaders to drop efforts to pass their own version.

Pressured by the calendar, financial markets and public opinion polls, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell 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 on 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 — though polls show the public more inclined to blame Republicans.

“People are so tired of this,” President Barack Obama said Tuesday in an interview with Los Angeles TV station KMEX.

In New York, the Fitch rating agency warned that it was reviewing the government’s AAA credit rating for a possible downgrade, though no action was near. The firm, one of the three leading U.S. credit-ratings agencies, said that “the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.”

Stock markets gave negative reviews as well, with the Dow Jones industrial average and Standard & Poor’s 500 index both dropping Tuesday by nearly 1 percent. Asian stock markets fluctuated between gains and losses in early trading Wednesday as the deadline for lawmakers to agree on a higher government borrowing limit drew even closer.

According to Treasury Secretary Jacob Lew, unless Congress acts by Thursday, the government will lose its ability to borrow and will be required to meet its obligations relying only on cash on hand and incoming tax receipts.

Congress is trying to pass two measures that are normally routine: A temporary funding bill to keep the government running and legislation to raise the $16.7-trillion borrowing limit.

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 of Congress.

It was expected to mirror a deal the leaders had nearly reached on 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 tried in vain to write legislation that would satisfy Republican lawmakers, especially hardcore conservatives in the tea party caucus.

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 Republican lawmakers whose biggest electoral fears are of primary challenges from the right.

Heritage Action said Boehner’s proposal “will do absolutely nothing to help Americans who are negatively impacted by Obamacare,” referring to the president’s signature health care law.

The last of Boehner’s two bills had the same dates as the emerging Senate plan on the debt limit and shutdown.

But it also blocked federal payments for the president, members of Congress and other officials to help pay for their health care coverage. And it prevented the Obama administration from shifting funds among different accounts — as past Treasury secretaries have done — to let the government keep paying bills for weeks after the federal debt limit has been reached.

Boehner’s inability to produce a bill that could pass his own chamber likely means he will have to let the House vote on a Senate compromise, even if that means it would pass with strong Democratic and weak Republican support. House Republican leaders have tried to avoid that scenario for fear that it would threaten their leadership positions, and some Republicans worried openly about that.

“Of all the damage to be done politically here, one of the greatest concerns I have is that somehow John Boehner gets compromised,” said Republican Sen. Lindsey Graham, a former House member and Boehner supporter.

With the default clock ticking ever louder, it was possible the House might vote first on a plan produced by Senate leaders. For procedural reasons, that could speed the measure’s trip through Congress by removing some parliamentary barriers Senate opponents might erect.

The strains of the confrontation were showing among Republican lawmakers.

“It’s time to reopen the government and ensure we don’t default on our debt,” Republican Rep. Jaime Herrera Beutler said in a written statement. “I will not vote for poison pills that have no chance of passing the Senate or being signed into law.”

The partial shutdown began on Oct. 1 after House Republicans refused to accept a temporary funding measure to provide the money to run the government unless Obama agreed to defund or delay his health care reform. House Republicans also refused to move on needed approval for raising the amount of money the Treasury can borrow to pay the nation’s bills.

The hard-right tea party faction of Republicans in the House has seen both deadlines as a weapon to get their way on gutting the health care overhaul, designed to provide tens of millions of uninsured Americans with coverage. The White House refused to abandon Obama’s signature legislative achievement, and the Democratic-controlled Senate rejected legislation to achieve the Republicans’ goal.

House Republicans have since dropped their demands to defund or delay the health care law.

Senate Republicans, who must be elected on a statewide basis rather than in congressional districts drawn up to secure a Republican advantage, in particular were eager to end the partial government shutdown and avoid an even greater crisis if the government were to default.

The partial government shutdown has furloughed more than 400,000 federal workers.

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Associated Press writers Alan Fram, David Espo, Steven R. Hurst. Andrew Taylor, Charles Babington, Stephen Ohlemacher, Henry C. Jackson and Donna Cassata contributed to this report.

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