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With Government Default Only 4 Days Away, Deal Still Seems Unlikely

Sen. Harry Reid

Sen. Harry Reid

With just four days to go before the government runs out of money and defaults, congressional leaders had set apart side issues like Obamacare and finally began negotiating on the budget – but they quickly reached an impasse when Senate Democrats objected to the attempt by Republicans to continue the deep and painful “sequester” cuts well into 2014.

Just as observers began hoping that there might be a compromise on the horizon, it appears that the two sides are far from an agreement that could get enough votes to pass the Democratic-controlled Senate and Republican-controlled House.

With Republicans feeling the blame for the government shutdown and looming default was resting largely on them, they cobbled together a plan to end the government shutdown — now entering its third week — and raise the $16.7 trillion debt limit. 
But any progress was scuttled when Democrats tried to press their political advantage by seeking to undo what the Washington Post called a “cherished prize” for the GOP: the deep agency spending cuts known as the sequester.
Republicans indicated they had no interest in backing away from the sequester cuts.The fight over the debt limit is “typically a point where you try to create reforms and reduce deficits, so to agree to something that raises spending from previously agreed-to levels, I just can’t imagine that,” said Sen. Bob Corker (R-Tenn.). “I just can’t imagine how that has any possibility of becoming law.” Christine Lagarde, managing director of the International Monetary Fund, warned on NBC’s “Meet the Press” that if the U.S. failed to make scheduled payments to investors, it “would mean massive disruption the world over. And we would be at risk of tipping yet again into a recession.”

But Democrats said they were protesting a plan developed by Sen. Susan Collins (R-Maine) to permit the cuts to stay in place through March, allowing another round of sequester cuts to hit on Jan. 15.

If that happened, Democrats say, it would put agency spending for fiscal 2014, which began Oct. 1, $90 billion lower than what they have proposed and by March they would have little opportunity to renegotiate the numbers, a top priority, because the fiscal year would be half over.

Outside analysts say Treasury Secretary Jack Lew will not begin missing payments immediately but will begin to run short of funds no later than Nov. 1, when nearly $60 billion is due to Social Security recipients, Medicare providers, active-duty military service members and civil-service retirees.

Investors are next due to collect interest on Treasury bonds, considered the most important payments from the perspective of global markets, on Oct. 31.

But many lawmakers are afraid of missing the Thursday deadline. If that happens, Republicans know they will continue to get destroyed in public opinion polls.

“Look, I guess we can get lower in the polls. We’re down to blood relatives and paid staffers now,” Sen. John McCain (R-Ariz.) joked on “Face the Nation.” “But we’ve got to turn this around. And the Democrats had better help us.”

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