Democrats sought to forge a last-ditch compromise with Republicans on Friday by offering a concession to avoid a crippling U.S. default, but a bitter divide remained before Tuesday’s deadline to raise the country’s debt ceiling. The Republican-controlled House of Representatives approved a deficit-cutting plan and the Democratic-led Senate quickly rejected it, moves that underscored the ideological differences but also opened the way to start negotiating a deal.
The back-to-back votes broke weeks of political inertia in efforts to lift the $14.3 trillion U.S. debt limit by Tuesday after which the world’s largest economy will be unable to pay all of its bills, the government says. But hopes for a quick resolution faded as the Senate adjourned for the evening after a round of parliamentary maneuvering and finger-pointing, setting the stage for a tense weekend in Washington. Senate Democratic Leader Harry Reid ceded some ground late on Friday when he revised his own deficit-reduction proposal to incorporate parts of a “backup plan” first proposed by the Senate’s top Republican, Mitch McConnell.
The new version would essentially give President Barack Obama the authority — and the blame — to raise the debt ceiling in three stages to cover U.S. borrowing needs through the 2012 elections when he is running for a second term. Obama and his Democrats had hoped to avoid multiple votes before the election. Despite the pressing deadline, progress toward an agreement did not appear imminent.
“They are refusing to negotiate with us and all they do is talk,” Reid told reporters after the Senate vote, which like the House tally hewed to party lines. Delays and procedural hurdles will still make it all but impossible for Congress to strike a deal and send it to Obama’s desk before Monday night at the earliest, injecting further uncertainty into already rattled global financial markets. Even if a late deal can be struck, the United States risks losing its top-notch AAA credit rating, a once-unthinkable event for world financial markets that would push up the US cost of borrowing while the economy is still struggling.
