WASHINGTON - A campaign to persuade the Republican-led House to lift the federal debt limit collapsed in messy failure Tuesday, leaving Washington sliding toward a critical deadline, just two days away, with no clear plan for avoiding a government default.
Senate leaders moved quickly to pick up the pieces, saying they were "optimistic" that they could strike a deal to advance an alternative proposal that would raise the debt limit through Feb. 7 and end a government shutdown, now in its third week.
But it was unclear whether an agreement between Senate Majority Leader Harry Reid (D., Nev.) and Minority Leader Mitch McConnell (R., Ky.) could pass the Senate before the Treasury Department exhausts its borrowing power Thursday.
Meeting that deadline would be impossible if Sen. Ted Cruz (R., Texas) or other conservative hard-liners chose to put up roadblocks, Democrats said. Sen. John Thune (R., S.D.) said Republican leaders were leaning on Cruz and his allies to avoid unnecessary delays.
Meanwhile, any bill passed by the Senate would have to go back to the House, where Speaker John A. Boehner (R., Ohio) and his leadership team showed once again that they had lost all control of their majority.
After trying all day, with increasing desperation, to cobble together a debt-limit plan that could win the support of 217 Republicans, Boehner and his top deputies gave up and abruptly canceled a scheduled vote on the measure Tuesday evening and left the Capitol without further plan or explanation.
"We are done for the night," a weary Majority Whip Kevin McCarthy (R., Calif.) said as he left a marathon session in Boehner's office that began as an airing of complaints from recalcitrant conservatives and soon ballooned into a full-blown emergency session of senior lawmakers and committee chairmen.
The chaos on Capitol Hill was already reverberating through the financial world. U.S. financial markets closed lower Tuesday, while Fitch Ratings, the third-largest credit-rating agency, took a step toward a potential downgrade of the government's AAA rating.
Unless Congress acts by Thursday, Treasury Secretary Jack Lew will be left with just $30 billion in cash and a fluctuating flow of incoming tax revenue to pay the nation's bills. While Lew is unlikely to begin missing payments immediately, independent analysts say he would run short of funds no later than Nov. 1.
Sen. Richard J. Durbin (D., Ill.) told reporters that aides to the two Senate leaders would work through the night to complete details of the emerging Senate measure. "They had a basic agreement," Durbin said of Reid and McConnell. "All pointing in the right direction."
McConnell spokesman Don Stewart added in a statement: "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."
In addition to lifting the $16.7 trillion debt limit, the emerging measure would fund the government through Jan. 15. It would also create additional safeguards to ensure that people who receive subsidies to buy insurance under President Obama's new health-care program are in fact eligible - a key Republican demand.
In the interest of striking a bipartisan deal, Democratic leadership aides said they were considering dropping a demand to delay a new tax on existing health insurance plans, a change intended to benefit organized labor. Meanwhile, Republicans said they were considering dropping a provision that would deny the Treasury Department flexibility to manage the nation's books after the Feb. 7 deadline - a nonstarter with the White House.
Durbin, the Senate's No. 2 Democrat and chief vote counter, predicted that the final package would pass the Senate by a wide margin with support from both parties.
"With McConnell's name on it," he said, "we feel it will get a good, strong vote."
Its fate in the House, however, appeared uncertain. While Minority Leader Nancy Pelosi (D., Calif.) has pledged the support of all 200 Democrats, it was unclear after Tuesday's debacle that Boehner could muster even the handful of Republicans necessary to push the bill to final passage.
Boehner's initial proposal would have funded the government through Dec. 15, raised the debt limit through Feb. 7, and offered two victories for conservatives: a delay of the tax on medical devices that helps finance the new health-care law and an end to employer health subsidies for lawmakers, their staffs, and members of the executive branch, who are required to join the new health-care exchanges.
INSIDE
Protesters urge Rep. Fitzpatrick to help end impasse. A10.
Intelligence furloughs called grave error. A11.
Erin Arvedlund on the impact
of a debt default. A16.
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