U.S. moves closer to default as shutdown enters third week

PanARMENIAN.Net - The United States moved closer to a default that could seriously harm the economy and a partial government shutdown entered its third week as Senate Democratic and Republican leaders remained at odds over spending in their last-ditch negotiations to end the crises gripping the nation, The Associated Press reported.

Democratic Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell spoke by phone on Sunday, October 13 but failed to agree on a deal to raise the nation's borrowing authority above the 16.7 trillion dollar debt limit. Separately, they also could not agree on a plan to reopen a government still shuttered on its 14th day. Congress is racing against the clock, with Treasury Secretary Jack Lew warning that the US will quickly exhaust its ability to pay the bills on Thursday.

The reaction of world markets and the Dow Jones on Monday could 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.

The shutdown has forced 350,000 federal workers into unpaid leave, impeded various government services, put continued operations of the federal courts in doubt and stopped the federal tax agency from processing tax refunds. Several parks and monuments remain closed, drawing a protest at the National World War Two Memorial on Sunday that included conservative tea party-backed politicians who had unsuccessfully demanded defunding of Mr Obama's three-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.

"I'm optimistic about the prospects for a positive conclusion to the issues before this country today," Reid said as the Senate wrapped up a rare Sunday session.