WASHINGTON - Both President Barack Obama and the top Democrat in Congress reported progress Monday toward a deal to avoid a threatened default and end a two-week partial government shutdown, as Obama called congressional leaders to the White House to press for an end to the impasse.
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 doesn't approve a separate measure by Thursday increasing the debt ceiling — the amount of money the government is allowed to borrow — the Obama administration says it risks default. The two normally routine pieces of legislation have become entangled in disputes over Obama's health care overhaul and government spending.
Under discussion is an increase in the debt limit so the government can continue paying its bills well into next year and a short-term funding measure that would re-open the government.
Visiting a Washington charity, Obama mentioned the possible progress in the Senate and said his mid-afternoon meeting will determine whether it's real.
"There has been some progress on the Senate side, with Republicans recognizing it's not tenable, it's not smart, it's not good for the American people to let America default," he said while visiting a Washington charity that has retained furloughed government workers as volunteers.
Otherwise, he warned, the threat of default was legitimate.
"If we don't start making some real progress both in the House and the Senate, and if Republicans aren't willing to set aside some of their partisan concerns in order to do what's right for the country, we stand a good chance of defaulting," he said.
After meeting twice Monday with his Republican counterpart, Democratic Majority Leader Harry Reid opened the Senate session by saying he was 'very optimistic we will reach an agreement this week that's reasonable in nature." Moments later, Republican leader Mitch McConnell seconded Reid's view.
They spoke after what McConnell termed "a couple of very useful discussions."
While Reid said there was not yet an accord, he said he hoped to have a proposal to outline when the leaders of Congress meet with Obama at mid-afternoon.
Reid and McConnell — veteran senators hardened by several budget disputes and years of negotiations — are at an impasse over yet another source of fiscal fighting: the automatic, across-the-board spending cuts known as sequestration and whether to undo or change them as part of a budget deal. Democrats are pressing for a higher amount of spending, while Republicans want to keep the spending at the deficit-cutting level of the 2011 law, the result of that year's high-stakes budget battle.
Officials in both parties said House and Senate negotiators would be appointed to seek a deficit-reduction agreement that could ease or eliminate a new round of automatic spending cuts scheduled to take effect in January. While the current round of cuts fell on both domestic programs and defence, the upcoming reductions would hit primarily the Pentagon.
The officials said the two leaders were discussing legislation to raise the $16.7 trillion debt limit until spring. It was not clear if that would permit Treasury Secretary Jacob Lew to employ a series of steps that could add additional months to the extension, as administrations in both parties have done in recent years.
In addition to raising the debt limit and reopening the government, officials said, the two leaders were discussing a possible tightening in income verification requirements for individuals who qualify for subsidies under the health care law known as Obamacare. Democrats were resisting a Republican-backed proposal to suspend a medical device tax that was enacted as part of the health care law. The tax is widely unpopular among lawmakers in both parties, but the outcome of that disagreement remained unclear.
These officials spoke on condition of anonymity, saying they were not authorized to discuss private matters.
Separately, a bipartisan group led by Republican Sen. Susan Collins met for two hours Monday morning on a possible solution to the impasse.
"We're making very good progress, but there's still many details to be worked out," Collins said before joining her Republican colleagues at a meeting with McConnell.
Unclear was whether any Senate deal would pass the Republican-controlled House by Thursday, though Senate Democrats were hoping momentum and an imminent default would pressure House lawmakers.
There was no certainty that the growing anxiety among financial leaders around the world would provide the necessary jolt to Senate leaders, who represent the last, best chance for a resolution after talks between President Barack Obama and House Republican leaders collapsed.
Democratic Sen. Joe Manchin said Monday that investors are growing increasingly "skittish" about the possibility of default. The bond markets were closed for a holiday, and by afternoon but the stock market rose into positive territory on the upbeat talk from Senate leaders.
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 shutdown has furloughed 350,000 federal workers, impeded various government services, put continued operations of the federal courts in doubt and stopped the IRS from processing tax refunds. Some parks and monuments remain closed, drawing a protest at the National World War II Memorial on Sunday that included tea party-backed lawmakers who had unsuccessfully demanded defunding of Obama's 3-year-old health care law in exchange for keeping the government open.
Sen. Bob Corker, a Republican, said the leaders of both parties need to be "getting on the same page."
Politically, Republicans are reeling, bearing a substantial amount of the blame for the government shutdown and stalemate.
"We're in a free-fall as Republicans, but Democrats are not far behind," said Sen. Lindsey Graham in warning Democrats about seizing on the bruised Republican brand as leverage to win more concessions.
McConnell and Republicans want to continue current spending at $986.7 billion and leave untouched the new round of automatic cuts on Jan. 15 that would reduce the amount to $967 billion. Democrats want to figure out a way to undo the reductions, plus a long-term extension of the debt limit increase and a short-term spending bill to reopen the government.
The sequester cuts took effect earlier this year. They had been intended to be so onerous that they would force Washington to reach a lasting deal on government spending. But that so-called grand bargain was never reached.
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