US lawmakers advance debt deal, test vote delayed

With a deadline looming to raise the United States' $14.3 trillion borrowing limit, lawmakers fighting against clock to forge bipartisan compromise agreement.

By REUTERS
July 31, 2011 08:53
3 minute read.
Boehner and McConnel discuss US debt deal

Boehner 311. (photo credit: REUTERS)

 
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WASHINGTON - The US Senate delayed until later on Sunday a key test vote on a Democratic plan to raise the country's debt limit as signs of progress emerged in negotiations to strike a deal to avert a damaging default.

With a Tuesday deadline looming to raise the government's $14.3 trillion borrowing limit, lawmakers are fighting against the clock to forge a bipartisan compromise agreement that can pass both the Democratic-controlled Senate and the House of Representatives, which Republicans lead.

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The Senate had scheduled a 1 a.m. EDT (0500 GMT) test vote on Sunday on a debt limit and deficit reduction plan presented by Senate Majority Leader Harry Reid that Republicans said they opposed and could have blocked.

But Reid told the Senate late on Saturday night that the vote would now be held at 1 p.m. EDT (1700 GMT) on Sunday to give negotiators "as much time as possible".

"There are negotiations going on at the White House now on a solution that will avert a catastrophic default on the nation's debt," Reid said.

"There is still a distance to go," he said.

Negotiators more recently have been focusing on a possible $2.8 trillion debt limit increase tied to equal spending cuts, but the final number is still not set, an aide familiar with the talks told Reuters.

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But after a week of bitter partisan sparring that had brought the world's largest economy ever closer to default while the world watched incredulously, the atmosphere for a hoped-for eleventh-hour compromise appeared to improve.

"There's certainly a more positive feeling about reaching an agreement this evening than I've felt in a long time," Senator Richard Durbin, the No. 2 Democrat in the Senate, said.

Requiring a minimum of 60 "yea" votes to close debate and move the Reid plan to a vote on passage, the Sunday afternoon tally would be a barometer of whether bipartisan support could be mustered for a compromise that could pass both houses by Tuesday.

Getting that deal in place before Asian markets open by about 5 p.m. EDT (2100 GMT) on Sunday would provide nervous investors some reassurance.

But the timeframe looked very tight.

Lawmakers optimistic deal can get done

Earlier, Senate Republican leader Mitch McConnell and House Speaker John Boehner expressed confidence a bipartisan deal could be forged after their contacts on Saturday with President Barack Obama and Vice President Jose Biden.

As Tuesday's deadline drew nearer, the phone discussions between the Republican leaders and the White House seemed a positive step as the president had remained mostly sidelined from congressional discussions during the week.

"I think we've got a chance of getting there," McConnell said. Reid had said earlier on Saturday a deal was not close.

Unless Congress raises the debt ceiling by Tuesday, the government would be barred from further borrowing after then, according to the US Treasury, and could quickly run out of money to pay all its bills.

"Our country is not going to default for the first time in its history -- that's not going to happen," McConnell said.

A US default would plunge financial markets and economies around the globe into turmoil.

The political gridlock has also put the United States at risk of losing its top-notch Triple A credit rating. A downgrade could prompt global investor flight from US bonds and the dollar, raising borrowing costs for Americans when the economy remains fragile.

According to an aide familiar with the ongoing talks, the negotiators were zeroing in on a plan for triggering broad, automatic spending reductions if an agreement on additional savings gets hung up in Congress later this year.

The aide said the forced savings would include defense spending and Medicare, the healthcare program for the elderly. While benefits would not be cut, the aide said, other cost savings would be achieved here -- an idea that Obama already has embraced.

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