[Breaking news update at 2:08 p.m.]
Senate Majority Leader Harry Reid and his Republican counterpart, Mitch McConnell, both said Monday they were optimistic they would forge a compromise acceptable to both parties to end the partial government shutdown and avoid a debt default as soon as Thursday.
[Original story moved at 1:55 p.m.]
Negotiations heated up Monday on a Senate compromise to end the partial government shutdown and avoid a possible U.S. default, with congressional leaders heading to the White House after talks cited as progress toward a deal.
“We’re getting closer,” Senate Majority Leader Harry Reid told reporters after meeting with his Republican counterpart, Mitch McConnell.
Reid said nothing was finalized, and that he hoped to have some kind of draft to take to the 3 p.m. ET meeting with President Barack Obama.
During a visit to a local food kitchen, Obama cited “some progress” in the Senate negotiations, but he also warned of what he called continued partisan brinksmanship by House Republicans.
“We’ll see this afternoon whether this progress is real,” Obama said of his upcoming meeting with the top Democrats and Republicans in the House and Senate.
“I think there has been some progress in the Senate,” he continued, adding that House Republicans “continue to think that somehow they can extract concessions by keeping the government shut down or by threatening default, and my hope is a spirit of cooperation will move us forward over the next few hours.”
Separately, House Speaker John Boehner and other top House GOP leaders will meet later Monday to discuss their options and consider preparing their own bill to raise the federal borrowing limit in the event the Senate talks break down.
The political stalemate in Washington caused the government to start shutting down on October 1 because Congress failed to authorize spending for the new fiscal year, which started that day.
Another deadline looms on Thursday, when the Treasury says it will need Congress to raise the debt ceiling so it can borrow more money to pay all the government’s bills.
During his visit to Martha’s Pantry in Washington, Obama said the congressional leaders could “solve this problem today.”
He warned that a default, in which the government would lack enough cash on hand to pay down its debt obligations as well as other daily bills such as Social Security checks “could have a potentially devastating effect on our economy.”
“We’ve already had a damaging effect on our economy because of the shutdown,” he said. “That damage would be greatly magnified if we don’t make sure that government’s paying its bills, and that has to be decided this week.”
Sen. Joe Manchin of West Virginia told CNN early Monday that a deal was 70% to 80% done, while Republican Sen. Bob Corker of Tennessee cited progress in talks with Manchin and other colleagues from both parties.
“I’m more optimistic today at 9:50 (a.m.) than I was at last night when I went to bed,” Corker told reporters.
However, Manchin and moderate GOP Sen. Susan Collins of Maine, who have spearheaded the bipartisan talks, warned more work needs to be done. According to Manchin, Reid and McConnell must work out vital specifics.
The two party leaders met around midday in McConnell’s office, and Reid offered his positive assessment when he walked out.
According to Manchin, the framework under discussion would temporarily fund the government to end the shutdown and also raise the federal borrowing limit for a limited period.
At the same time, the proposal would set up House-Senate negotiations on a budget for fiscal year 2014, and delay for two years a tax on medical devices imposed under Obama’s signature health care reforms, Manchin said.
In another provision involving the 2010 Affordable Care Act, known as Obamacare, the proposed compromise would strengthen verification measures for people getting federal subsidies to purchase health insurance.
Manchin told CNN’s “New Day” that Reid and McConnell now “need to put the numbers to it.”
Early blowback from conservatives focused on the proposed budget talks, which would include flexibility to soften or eliminate forced spending cuts known as sequestration that were part of the agreement that resolved the last congressional showdown over the debt ceiling in 2011.
Corker said Democrats have retreated from a weekend push for the deal to wipe out the sequestration cuts, signaling progress on an issue that could have derailed agreement by both the Democratic-led Senate and the Republican-led House.
“It appeared the Democrats had wandered off the reservation and overreached over the last 48 hours,” said Corker, a veteran of many congressional budget battles.
CNN political analyst John Avlon said Monday that Democrats wanted to press what they perceive as an advantage over Republicans on how the public is perceiving the latest round of Washington budget and deficit brinksmanship.
“What’s behind it (are) poll numbers that saw Republicans getting their butt kicked because of this whole gamesmanship,” Avlon said.
Manchin said the brinksmanship was a chance to address what he called the “draconian cuts” of sequestration.
A new round of the across-the-board spending cuts for the military and other non-entitlement programs takes effect on January 15, he said.
As reported by CNN Chief Congressional Correspondent Dana Bash and CNN Senior White House Correspondent Jim Acosta, the main sticking point for now involves how long an agreement would fund the government to end the shutdown and increase the debt limit to enable required federal borrowing.
Democrats want the debt ceiling increase to extend as long as possible to avoid similar showdowns in coming months.
At the same time, they seek a temporary spending plan to reopen the government while formal budget negotiations work out a longer-term agreement that can negate the impacts of the forced sequestration cuts.
Republicans, however, want a longer spending proposal that would lock in the planned sequestration cuts in coming months, with a shorter debt ceiling extension in order to negotiate further deficit-reduction measures.
Reid and McConnell along with other top senators began discussions over the weekend.
The Senate and House were both scheduled to be in session on Monday afternoon.
A White House official indicated what Obama would tell congressional leaders at their meeting.
“With only a few days until the government runs out of borrowing authority, the President will make clear the need for Congress to act to pay our bills, and reopen the government,” the official said. “The President will also reiterate our principles to the leaders: we will not pay a ransom for Congress reopening the government and raising the debt limit.”
Watching developments closely in Washington, Wall Street greeted news of apparent progress in the Senate positively. Stock indexes gained in afternoon trading after sharp early losses to start the week.
Mindful of the economic impact, senators from both parties expressed optimism a deal was in reach.
“I believe we can do it,” Democratic Sen. Dick Durbin of Illinois said Sunday on NBC’s “Meet the Press.” “I hope sensible people prevail, because at this point, it’s not just a shutdown and all of the damage it’s caused, but if we default on our debt, it will have a dramatic impact on the savings account, on the retirement account of average Americans.”
On the other side of the aisle, Republican Sen. Rob Portman of Ohio said he also thinks Congress will find a way out of the crisis before Thursday, when the United States hits the debt ceiling.
“We will have decided as a Congress that we need to avoid going over the debt limit, and we’ll figure it out. And it will probably be a relatively short-term solution,” Portman said.
A weekend of rejections
Despite the positive prognoses, the only actions over the weekend involved one “no” after another.
• Reid said Saturday the plan Collins was assembling was no longer on the table, because it treated reopening the government as a “concession.” Reid continues to demand that any plan include a “clean” bill, one that raises the debt limit and reopens the government with no strings attached. However, Manchin’s comments Monday indicated the Collins plan remained alive.
• Republicans blocked a measure to extend the debt limit with no strings attached, refusing to support a procedural vote that would have brought it to the Senate floor.
• House Republican leaders said Obama rejected their proposal for a six-week extension of the federal debt ceiling.
• Meanwhile, Republicans objected to the prospect being floated over the weekend that the forced spending cuts of sequestration, which have cut deeply into federal operations since March, might be rolled back under any eventual deal.
The Treasury Department said it will be unable to pay the government’s bills unless the debt limit is increased by Thursday.
Christine Lagarde, head of the International Monetary Fund, said Saturday the consequences of a failure to raise the debt limit would be dire for economies around the world. She spoke to CNN’s Richard Quest at an Institute of International Finance conference in Washington.
“You know, I’ve just spent the last two days with representatives of about 188 countries around the world. I wouldn’t say they are confident. I would say they are concerned, and they are very anxious to see this crisis resolved, because they know it’s going to impact on their economy,” Lagarde said.
Obama spoke by phone with House Minority Leader Nancy Pelosi on Sunday to discuss the ongoing battle over the shutdown, the White House said. The two agreed on the need for a “clean debt limit increase” and a “clean continuing resolution to open up the government and end the shutdown.”
Mindful that the Thursday deadline is days away, House Republican leaders are considering all their options even as Republican and Democratic Senate leaders try to craft a deal on the debt ceiling, said a GOP leadership aide, speaking on the condition of anonymity.
One option Republican leaders are considering is sending back a measure to the Senate that would increase the debt limit; exactly what it would contain is unknown at this time.
But the aide noted that the House is able to move quicker than the Senate, and this idea could come into play. If a decision were made to pursue this idea, then it would require Democratic support to pass in the House.
Senate Democrats meet with president
Senate Democrats met with Obama on Saturday, and a Senate Democratic leadership aide said the party is unified.
“Democrats are willing to negotiate on anything Republicans want to discuss as soon as we reopen the government and pay our bills,” said the aide.
Another Democratic source said party leaders regard Republicans as lacking a coherent position. They hope McConnell can “cut through the clutter,” the source told CNN’s Dana Bash.
The sources, who are familiar with the talks, spoke on the condition of anonymity so they could speak candidly.
Even as he demanded a “clean” bill, Reid said he and McConnell are involved in “cordial” and “preliminary” discussions.
“I hope that our talking is some solace to the American people and the world,” Reid said. He said McConnell had approached him. “This hasn’t happened until now,” Reid said.
CNN’s Dana Ford, Greg Clary, Deirdre Walsh, Mark Preston, Chelsea J. Carter, Dan Merica, Brianna Keilar and Janet DiGiacomo contributed to this report.