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The Republican-controlled House canceled a vote Tuesday night on a plan to reopen the federal government and raise the debt ceiling after support from conservatives for the deal crumbled, leaving Washington without a clear path forward for avoiding a first-ever default on the nation’s debt.
Later Tuesday night, Senate leaders Harry Reid and Mitch McConnell moved to pick up the pieces of the shattered House effort, with aides to both senators expressing optimism a deal could be soon at hand.
“Senator Reid and Senator McConnell have re-engaged in negotiations and are optimistic that an agreement is within reach,” said Adam Jentleson, spokesman for Reid (D-Nev.).
“Given tonight’s events, the leaders have decided to work toward a solution that would reopen the government and prevent default. They are optimistic an agreement can be reached,” said Don Stewart, spokesman to McConnell (R-Ky.).
It was already far from clear if the House proposal could attract enough support in the Democratic-controlled Senate to end Washington’s political crisis. The plan contains several provisions that Democrats have strongly opposed.
The influential conservative group Heritage Action also opposed the House proposal soon after it was announced, and conservatives close to the House leadership expressed alarm that they had shut down the government and would get nothing for it except a punitive measure restricting their own staff’s healthcare, according to senior House Republican aides.
“I’ve got one vote and I’m a no,” Rep. Thomas Massie (R-Ky.) said as he left a meeting with House Speaker John Boehner’s (R-Ohio) leadership team.
The stunning turnaround could represent yet another rebuke to Boehner, whose previous efforts at compromise have been thwarted by his party’s right flank. And with the U.S. Treasury set to exhaust its ability to borrow money on Thursday, Fitch Ratings, a credit rating agency, announced Tuesday that it was accelerating its timetable for a potential U.S. credit rating downgrade, among the first concrete effects of the standoff. If Fitch follows through, it would become the second credit rating firm to downgrade U.S. government debt, potentially triggering ripple effects across a range of financial markets.
“Political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default,” Fitch said late Tuesday. “The U.S. risks being forced to incur widespread delays of payments to suppliers and employees, as well as Social Security payments to citizens — all of which would damage the perception of U.S. sovereign creditworthiness and the economy.”
Fitch’s announcment followed a day of declining optimism about efforts to resolve the crisis, , as Democrats and Republicans began attacking each other again and the White House said negotiators remained “far from a deal.’’
Just a day earlier, Senate leaders had been closing in a deal to end the two-week-old government shutdown, extend borrowing authority until Feb. 7 and fund federal agencies for three months. But the bipartisan Senate talks were put on hold Tuesday as negotiators awaited a plan from the Republican-led House.
Even the inklings of a House proposal that emerged earlier Tuesday drew immediate condemnation from Democrats, primarily because the plan would include significant changes to President Obama’s signature health-care law. Unlike the Senate proposal, the House plan originally included a two-year repeal of a medical device tax and a provision eliminating the employer health-care contribution for members of Congress and White House officials.
Later Tuesday, House Republicans regrouped around the new version of their bill, which dropped the medical device tax provision, and officials said they would bring it the House floor tonight, but later changed their minds. The new proposal was also unlikely to win bipartisan support, in part because it would fund federal agencies only through Dec. 15, creating the threat of another government shutdown just before Christmas.
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The House’s efforts have attacted derision from Democrats, who were holding firm in their opposition to what they characterized as GOP efforts to extract concessions in exchange for ensuring the nation’s fiscal health.
“It’s nothing more than a blatant attack on bipartisanship,” Senate Majority Leader Reid (D-Nev.) said of the first House proposal. Democrats, he added, “felt blindsided” by the House plan saying that it could sabotage the Senate talks.
If the renewed standoff is not resolved, it could threaten the Treasury Department’s ability to balance the nation’s financial books as early as Thursday, according to government officials and independent analysts. By then, the government would essentially be running on fumes, unable to borrow money from various sources.
Sometime next week, the Treasury would likely run short of cash, potentially imperiling some Social Security and other major payments, officials and analysts said. The nation’s first default on its debt could follow on Oct. 31, when the government could miss $6 billion in interest payments.
Despite the Obama administration’s warnings that breaching the debt ceiling Thursday could trigger a default and cause drastic economic consequences, a new Pew Research Center poll shows that a majority of Republicans and many independents don’t feel the same urgency. The poll shows 52 percent of Republicans, 38 percent of independents and 36 percent of Americans overall say the country can break the deadline without major economic problems.
Some congressional Republicans also have said the government can still pay interest on its loans even if the debt ceiling isn’t raised. White House Press Secretary Jay Carney on Tuesday labeled these Republicans “default deniers.”
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