With Deadline Looming, Lawmakers Struggle to Craft Debt Bill

A bitter mood prevailed on Capitol Hill as lawmakers struggled on Saturday to find a compromise measure to lift the nation's $14.3 trillion debt limit three days before a deadline to avert a ruinous defaul.

A day after the Republican-led House of Representatives passed a bill to cut the deficit and raise the cap on government borrowing, the debt saga shifted to the Democratic-led Senate. Democrats there pushed ahead with their own plan and sought to attract bipartisan support by adding some elements of a plan offered by Senate Republican leader Mitch McConnell. But 43 Senate Republicans signed a letter rejecting the plan, a sign the measure does not have the support it needs to advance in Congress.

"What will they vote for? Do they have any ideas? Let me know," Senate Democratic leader Harry Reid said on the Senate floor.

Back-channel talks held the best hope for a compromise. Unless Congress raises the debt ceiling, the government would be barred from further borrowing after Tuesday, according to the Treasury, and could quickly run out of money to pay all its bills.

The world has watched with growing alarm as political gridlock in Washington has brought the world's largest economy close to an unprecedented default, threatening to plunge financial markets and economies around the globe into turmoil.

McConnell called on Reid to move up a vote that had been set for 1 a.m. EDT on Sunday so the two sides could begin talks with the White House.

"We can't do it by ourselves, it has to have the only person in America who can sign something into law," McConnell said.

President Barack Obama urged lawmakers to strike a deal and head off what he has said would be an "inexcusable" default.

"There are multiple ways to resolve this problem," Obama, a Democrat, said in his weekly radio address. "Congress must find common ground on a plan that can get support from both parties in the House. And it's got to be a plan that I can sign by Tuesday."

The House was set to vote at around 2:30 p.m. EDT on the plan crafted by Reid, and Republicans said they expected to defeat that bill because it did not contain enough spending cuts.

"The Senate is burning up precious time by working all weekend on a doomed Reid bill that can't pass the House," a House Republican leadership aide said. "Congressional talks are essentially motionless until Senator Reid provides specifics to the Hill on what the president will sign."

Democratic Representative Sander Levin said it was "disgraceful" that Republicans had scheduled their vote on the Reid plan before the Senate even had a chance to take it up.

CRUCIAL WEEKEND

With its back against the wall, the Treasury could be forced to detail plans on Sunday before Asian markets open on which bills it would pay if a compromise does not appear to be in the works. Analysts believe it will stop other government spending to ensure bondholders are paid to avert a wide-scale financial crisis.

The drawn-out standoff has put the United States at risk of losing its top-notch AAA credit rating. A ratings downgrade could prompt global investor flight from U.S. bonds and the dollar, raising borrowing costs for Americans when the economy is already frail, growing at an anemic rate of 1.3 percent in second quarter, according to government data.

U.S. stocks endured their worst week in a year as the uncertainty made investors shy away from riskier assets and the dollar slumped to a record low against the safe-haven Swiss franc. Much worse could be in store if a debt deal doesn't appear to be on track by the time markets open on Monday.

Senate Democrats' debt-limit proposal, which would cut deficits by $2.2 trillion over 10 years, was revised by Reid to incorporate parts of a "backup plan" first proposed by McConnell. Under that version, Obama would be given the authority 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.

The biggest sticking point in the effort to get a deal is House Republicans' insistence on a two-stage strategy for raising the debt limit that could set up another showdown over the issue within a few months. Obama says that would be unacceptable because it would lead to economic uncertainty, putting a damper on jobs and growth.

With Republicans pushing to have the White House join the talks, Vice President Joe Biden, who has a rapport with McConnell from his years in the Senate, could emerge as a key player in final negotiations.