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Default looming, Day 14 of shutdown, no solution

14 October 2013 18:15 (UTC +04:00)

Baku-APA. With rising anxiety in the markets at home and abroad, Congress and the White House moved perilously closer to a default Monday with much of the government closed and Senate Democratic and Republican leaders still at odds in negotiations to end the crises, APA reports quoting Associated Press.

Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., spoke by phone Sunday but failed to agree on a deal to raise the nation's borrowing authority above the $16.7 trillion debt limit or reopen the government. Congress is racing the clock with Treasury Secretary Jack Lew warning that the U.S. will quickly exhaust its ability to pay the bills on Thursday.

Separately, a bipartisan group led by Sen. Susan Collins, R-Maine, 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 GOP colleagues at a meeting with McConnell. "We don't have a finished, agreed-upon product yet but I think we had an excellent meeting. And we'll get together later today."

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.

Sen. Joe Manchin, D-W.Va., said Monday that investors are growing increasingly "skittish" about the possibility of default. The bond markets were closed for Columbus Day, and by mid-morning the stock market was down modestly, with both the Dow Jones industrial average and Standard & Poor's 500 index losing less than 1 percent. Trading in Asia was muted, with markets in Tokyo and Hong Kong closed for holidays.

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.

Economists see greater financial danger from an historical default. 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.

Reid and McConnell — five-term senators hardened by budget disputes and years of negotiations — are at an impasse over the automatic, across-the-board spending cuts known as sequestration and whether to undo or change them as part of a budget deal. Republicans want to keep the spending at the deficit-cutting level of the 2011 budget law while Democrats are pressing for a higher amount.