Obama hopeful as fiscal meeting nears with top lawmakers

US president Barack Obama said lawmakers appear to have made progress on a deal to reopen the government and avert a looming default today as he prepared to meet congressional leaders with a Thursday deadline drawing near.

Mr Obama and vice president Joe Biden were due to meet at 3pm (1900 GMT) with Senate Majority Leader Harry Reid, Senate Republican Leader Mitch McConnell, House of Representatives Speaker John Boehner, and House Democratic Leader Nancy Pelosi, the White House said.

“My hope is that a spirit of cooperation will move us forward in the next few hours,” Mr Obama said after visiting a charity organisation for low-income families where some furloughed government workers have been volunteering.

Talks have been largely fruitless since what appeared to be a breakthrough on Thursday, but senators and aides from both parties said they still thought they could reach agreement in the coming hours.

With the most unrealistic demands taken away, the two sides were trying to craft a temporary measure that would allow Washington to step back from the ledge.

“I’m hopeful we can have something meaningful by the end of the day,” Republican Senator Roger Wicker of Mississippi said on MSNBC.

The Treasury Department says it cannot guarantee that the US government will be able to pay its bills past October 17th if Congress does not raise the $16.7 trillion debt ceiling by then.

It is unclear whether Congress can meet that deadline. Even if Republicans and Democrats in the Senate reach agreement today, hard-liners such as Texas Republican Senator Ted Cruz might be able to delay a vote for several days.

The House also would need to sign off on the plan. Republican leaders there face strong pressure from a vocal conservative flank that is deeply reluctant to make concessions to Mr Obama and his Democrats.

Many say they will refuse to back any deal that fails to undercut Mr Obama’s 2010 healthcare reform law, the Affordable Care Act - a non-starter for Democrats.

“We’ve got to draw some lines in the sand now. This, to me, is an epic battle over Washington versus America, and I hope America wins,” Republican Representative Matt Salmon of Arizona said on CNN.

Analysts expect that any deal is likely to come down to the wire.

Though Treasury likely will have enough cash on hand to meet its obligations for a week or so, it might be forced to pay a higher interest rate on debt it is due to issue on Thursday.

Banks and money market funds are already shunning some government securities that are normally used for short-term loans. In China, the largest foreign holder of US debt, the state news agency Xinhua said it was time for a “de-Americanised world”.

US stocks fell at the open today but by early afternoon major indexes were mixed. The S&P 500 Index was down 0.1 per cent while the Nasdaq Composite Index was up 0.2 per cent.

The government shutdown, now in its 14th day, is beginning to weigh on the economy as well. The hundreds of thousands of federal employees who have been temporarily thrown out of work are likely to get back-pay when the standoff is resolved.

But they aren’t getting paid now, forcing many to dial back on personal spending and cancel holiday travel plans.

Any agreement that would come in the following days would not resolve disagreements over long-term spending and the Affordable Care Act that led to the standoff in the first place.

Despite the objections of rank-and-file conservatives like Salmon, many Republicans are eager to move the discussion away from ‘Obamacare’ and toward possible spending cuts.

“All of us now are talking about spending, which is where we should have been in the first place,” Republican Senator Bob Corker of Tennessee said on MSNBC.

Throughout the shutdown, Mr Obama has said Republicans must agree to reopen the government and extend the debt ceiling before the two sides can begin talks on spending or tweaks to his Affordable Care Act.

That position has not changed.

“We will not pay a ransom for Congress reopening the government and raising the debt limit,” the White House said in a statement today.

A potential bipartisan plan being discussed in the Senate would raise US borrowing authority through to January 31st and keep the government open for several months.

Senate Democrats would like a longer time frame, to avoid rattling markets and consumers, and are backing legislation that would give Treasury enough borrowing power to extend through 2014.

“If we just extend this to January, we’ll be right back in the middle of this,” Democratic Senator Mark Begich of Alaska said on MSNBC.

A major sticking point appears to be the level of government spending, which has been reduced by the deep, across-the-board “sequester” spending cuts that took effect in March.

Another round of cuts are scheduled to kick in early next year. McConnell wants to protect them even though most Democrats and some Republicans want them eased.

Senate Republicans were pushing a plan that would keep the sequester cuts in place for up to six months. Democrats want to extend them for a much shorter period - initially proposing until November 15th - and then have spending rise to a slightly higher level.

The approximately $72 billion difference between the two positions is not insurmountable, but it could draw objections from conservatives in the House.

Reuters