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No Tuesday Vote, Senate Leaders Reboot Talks to End Budget Standoff

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(CNN) — Shortly after Republican leaders of the House of Representatives canceled plans for a Tuesday night vote, the two top figures in the Senate rebooted their own talks aimed at ending the U.S. budget standoff.

Spokesmen for Democratic Sen. Harry Reid and GOP Sen. Mitch McConnell — their chamber’s majority leader and minority leader, respectively — said Tuesday night that they restarted negotiations aimed at creating legislation that would fully reopen the government and raise the nation’s debt ceiling.

“Sen. Reid and Sen. McConnell … are optimistic that an agreement is within reach,” said Adam Jentleson, a spokesman for Reid.

Senate staffers were working through the night drafting a framework bill, though no announcement was expected before Wednesday, said McConnell spokesman Don Stewart.

It’s not certain if Wednesday might bring action in the House as well. As he left the Capitol, House Majority Leader Eric Cantor of Virginia said there would be “no votes tonight. We’ll see you in the morning.”

Whoever takes the lead, they can’t stop the partial shutdown of the federal government from entering its 16th day or change the fact the U.S. government is now even closer to a threatened default.

The Treasury Department says it will hit its borrowing limit on Thursday — and economists warn that failure to raise the debt limit by then could spike interest rates with possible catastrophic impact at home and abroad. With the Republican leadership apparently unable to come up with any plan acceptable to its members, the Wall Street bond-rating firm Fitch warned of a possible downgrade of gold-plated U.S. bonds, citing the risk of default from “political brinkmanship.”

Both chambers of Congress have been working on bills ahead of the deadline, with the notable distinction being that Democrats and Republicans have been talking to each other in the Senate while the GOP has been talking amongst itself in the House.

Ironically, it appeared Tuesday night that a bipartisan Senate deal may be closer to being, in part because a majority of Republicans haven’t been able to agree on anything themselves that could move on. Any House proposal would have to go to the Democratic-led Senate for consideration, with pressure mounting for a final agreement before financial markets react to the possibility of a first-ever U.S. default.

Rep. Joe Barton, R-Texas, told CNN’s “The Situation Room” that Tuesday night’s delay indicated House Speaker John Boehner didn’t have the votes to get the proposal through the House. Barton added that he would have voted against the measure.

“There’s no structural reform. There’s no cost savings,” he said. “It’s just kick the can down the road another six weeks or two months.”

Democrats, meanwhile, have railed against what’s unfolding in the GOP-led House.

President Barack Obama — who will meet Wednesday with Treasury Secretary Jack Lew — called for House Republicans to “do what’s right” by reopening government and ensuring the United States can pay its bills, telling CNN affiliate WABC that “we don’t have a lot of time” to avoid a possible default.

At the same time, he acknowledged Boehner’s difficulty in getting some accord in his own caucus.

“(Boehner) negotiating with me isn’t necessarily good for the extreme faction in his caucus,” Obama told WABC. “It weakens him, so there have been repeated situations where we have agreements. Then he goes back, and it turns out that he can’t control his caucus.”

The House proposal

According to multiple sources, the House plan would have called for funding the government through December 15 to end the partial shutdown that entered its third week on Monday. It also would increase the federal debt ceiling until February 7.

In addition, the House GOP version would have included a provision demanded by tea party conservatives that would prohibit federal subsidies for the President, officials in his administration, members of Congress and their respective staff in buying health insurance under Obama’s signature health care reforms.

Republicans dropped demands to include two other provisions related to Obamacare. One would have delayed a tax on medical devices proponents say is needed to help pay for the Affordable Care Act and the other would have tightened income verification of those seeking subsidies to purchase health insurance.

The House proposal also would have forbidden the Treasury from taking what it calls extraordinary measures to prevent the government from defaulting as cash runs low, in effect requiring hard deadlines to extend the federal debt ceiling.

Earlier, sources said Boehner was “struggling” to come up with enough votes to pass the GOP counterproposal to the Senate plan. After a two-hour caucus meeting that lasted far longer than scheduled, Boehner told reporters there was no final decision on what the GOP-led House would do.

In a possible signal that he would proceed on a plan opposed by the GOP tea party conservative wing, Boehner said “the idea of default is wrong and we shouldn’t get anywhere close to it.”

Hours later, GOP sources confirmed that the revised Republican plan would be put to a vote.

House Democrats criticized the plan as a reckless attempt to torpedo any chance at compromise.

Dems standing firm

House Minority Leader Nancy Pelosi, following a meeting between Obama and House Democratic leaders, signaled her caucus still wanted “clean” proposals to fund the government and raise the debt ceiling.

“The bill that they’re talking about right now is a bill to default. It’s a decision to default. Once they get over that, then we’ll see what they send to the floor,” she said of Republicans, adding that she remained optimistic Congress would find a path to resolve the matter.

Two senior House GOP sources told CNN’s Deirdre Walsh that the House GOP counterproposal would have been passed in a way that allows the Democratic-led Senate to strip provisions with a simple majority. Walsh and CNN Chief Congressional Correspondent Dana Bash explained that would make it harder for tea party conservatives such as GOP Sen. Ted Cruz of Texas to delay or derail the agreement.

The significance of having the House go first became clear later Tuesday, when sources in both parties told CNN that senators working on the agreement put their work on hold temporarily as Reid and McConnell waited to see how the House proceeded.

Reid and other Democrats immediately slammed the House efforts anyway, blasting its GOP leadership for what they called a reckless brinkmanship maneuver.

“Extremist Republicans in the House of Representatives are attempting to torpedo the Senate’s bipartisan progress with a bill that can’t pass the Senate,” Reid said on the Senate floor.

He earlier said he was “confident we will be able to reach a comprehensive agreement this week,” reiterating the optimism he expressed Monday night that raised hopes among investors, world leaders and regular Americans that the shutdown stalemate was nearing an end.

The White House also rejected the Republican effort.

And Sen. Bob Corker, R-Tennessee, said it was time to get a deal done after lengthy delays he blamed on the unrealistic goal set by GOP conservatives of gutting Obamacare.

“The fact is we’ve got to figure out a way to move ahead,” he told CNN’s “New Day” on Tuesday. “In fairness, on our side of the aisle, we’ve wasted two months, focused on something that was never going to happen.”

World watching DC

The congressional negotiations are being closely watched by other nations, which would also feel the impact should the United States run out of money to pay some of its bills.

Jon Cunliffe, who will become the deputy governor of the Bank of England, told British lawmakers over the weekend that banks should begin planning for contingencies.

The partial shutdown has proved costly. Hundreds of thousands of federal employees are either idle at home or not being paid while working.

And officials warn that tough choices are ahead about which bills to pay and which to let slide, should the shutdown and debt ceiling debate drag on.

So far, the standoff has cost the economy about $20 billion in gross domestic product, CNN’s Christine Romans reported Tuesday on New Day, citing Mark Zandi of Moody’s Analytics. GDP is a measure of the goods and services produced by an economy.



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