US Senate negotiations to bring the fiscal crisis to an end showed signs of progress on Sunday, but there were no guarantees the federal government shutdown was about to end or that a historic debt default would be avoided.
IMF managing director Christine Lagarde warned of “massive disruption” to the global economy if the US debt ceiling, which will be reached on Thursday, was not lifted. That is when the US Treasury runs out of authority to borrow money.
“We would be at risk of tipping, yet again, into recession,” Lagarde said in an interview broadcast on NBC’s Meet the Press program.
Friday’s optimism that a deal might be forged over the weekend vanished on Saturday and the talks moved from the acrimony of the US House of Representatives to the Senate.
US Senate Majority Leader Harry Reid and Republican US Senate Minority Leader Mitch McConnell held talks that Reid later called “substantive.”
Reid did not provide details, but his remarks gave some hope that Congress might soon pass legislation to fund the government — in shutdown mode since Oct. 1 — and raise its borrowing authority.
“I’m optimistic about the prospects for a positive conclusion to the issues before this country today,” Reid said before closing the Senate for the day.
Earlier on Sunday, McConnell issued a statement calling on Democrats to accept a bipartisan plan that would end the government shutdown and raise the borrowing authority.
Both the Senate and House were scheduled to be in session yesterday, even though it is the Columbus Day federal holiday.
However, whatever deal the Senate might reach will still have to return for approval by the House, where the Republican majority faces strong pressure from its vocal conservative flank not to make concessions to US President Barack Obama.
On Saturday, US House of Representatives Speaker John Boehner informed his rank-and-file that negotiations with the White House had collapsed.
What started as a Republican effort to fight Obama’s signature healthcare reform law by depriving it of funds and blocking a budget agreement has morphed into a stalemate on other issues.
“I don’t even understand, at this moment, what this is about,” Democratic Senator Claire McCaskill said.
Democratic Senator Dick Durbin boiled the fight down to a couple of seemingly easy matters to resolve: the size of the increase in Treasury’s borrowing authority and how much the government would be allowed to spend in a temporary funding bill after money ran out with the Sept. 30 fiscal year-end.
Nonetheless, Democrats and Republicans jockeyed to win added provisions to those two basic issues, slowing the talks.
While McConnell urged Democrats to accept a bipartisan plan that had been developing for several days, several senators and their aides said details were still being worked out on the very measure the top Republican was touting.
If those discussions progress, the normally slow-moving Congress could kick into high gear.
In 2011, during the last major battle over the debt limit, a deal was announced the night of July 31 of that year. By Aug. 1, the House of Representatives had passed a bill; the next day the Senate went along and hours later, Obama had signed it into law.
Even so, the 2011 fight went down to the wire and this year’s battle seems to be shaping up no differently. If a deal is reached, lawmakers could be voting on it as late as Wednesday or Thursday.
As the acrimony continued, China’s Xinhua news agency called for an end to the “pernicious impasse” and said it was time for a “de-Americanized world”.
China is among the largest foreign holders of US debt.