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Mitch McConnell
Senate Minority Leader Sen. Mitch McConnell, R-Ken., is surrounded by reporters as he walks to the Senate floor after meeting with Senate Majority Leader Sen. Harry Reid, D-Nev., in his office on Capitol Hill on Monday, Oct. 14, 2013 in Washington. The Senate's top two leaders both expressed optimism Monday that they were closing in on an agreement to prevent a national financial default and reopen the government after a two-week partial shutdown. (AP Photo/ Evan Vucci)

Reid, McConnell Optimistic on Debt-Shutdown Deal



WASHINGTON (AP) -- The Senate's top two leaders both expressed optimism Monday that they were closing in on an agreement to prevent a national financial default and reopen the government after a two-week partial shutdown.

After meeting twice Monday with his Republican counterpart, Democratic Majority Leader Harry Reid opened the Senate session by saying he was `very optimistic we will reach an agreement this week that's reasonable in nature." Moments later, Republican leader Mitch McConnell seconded Reid's view.

They spoke after what McConnell termed "a couple of very useful discussions."

A White House meeting with House and Senate leaders scheduled for the afternoon was postponed to give negotiators more time.

Officials in both parties said the two leaders were discussing legislation to raise the $16.7 trillion debt limit until spring, staving off a possible default. It was not clear if that would permit Treasury Secretary Jacob Lew to employ a series of steps that could add additional months to the extension, as administrations in both parties have done in recent years.

In addition to raising the debt limit and reopening the government, officials said, the two leaders were discussing a possible tightening in income verification requirements for individuals who qualify for subsidies under the health care law known as Obamacare. Democrats were resisting a Republican-backed proposal to suspend a medical device tax that was enacted as part of the health care law. The tax is widely unpopular among lawmakers in both parties, but the outcome of that disagreement remained unclear.

Officials said House and Senate negotiators would be appointed to seek a deficit-reduction agreement that could ease or eliminate a new round of automatic spending cuts scheduled to take effect in January. While the current round of these cuts fell on both domestic programs and defense, the upcoming reductions would hit primarily the Pentagon.

The officials spoke on condition of anonymity, saying they were not authorized to comment on the private discussions.

Visiting a Washington charity, Obama mentioned the possible progress in the Senate.

"My hope is that a spirit of cooperation will move us forward over the next few hours," the president told reporters.

Otherwise, he warned that the threat of default was legitimate.

"If we don't start making some real progress both in the House and the Senate, and if Republicans aren't willing to set aside some of their partisan concerns in order to do what's right for the country, we stand a good chance of defaulting," he said.

Sen. Joe Manchin, D-W.Va., said Monday that investors are growing increasingly "skittish" about the possibility of default. The bond markets were closed for Columbus Day, but the stock market rose into positive territory on the upbeat talk from Senate leaders.

The shutdown has furloughed 350,000 federal workers, impeded various government services, put continued operations of the federal courts in doubt and stopped the IRS from processing tax refunds.

Economists see greater financial danger from a 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.

In announcing the congressional leaders' meeting with Obama, the White House said the president would repeat a vow he has made consistently in recent weeks: "We will not pay a ransom for Congress reopening the government and raising the debt limit."

The two Senate leaders, Reid and McConnell, had spoken by phone Sunday but failed to agree on a deal to raise the nation's borrowing authority above the $16.7 trillion debt limit or reopen the government. Congress is racing the clock with Lew warning that the U.S. will quickly exhaust its ability to pay the bills on Thursday.

Separately, a bipartisan group led by Sen. Susan Collins, R-Maine, met for two hours Monday morning on a possible solution to the impasse.

"We're making very good progress, but there's still many details to be worked out," Collins said before joining her GOP colleagues at a meeting with McConnell. "We don't have a finished, agreed-upon product yet but I think we had an excellent meeting. And we'll get together later today."

Tennessee's Sen. Bob Corker, a Republican, said the leaders of both parties need to be "getting on the same page."

McConnell and Republicans want to continue current spending at $986.7 billion and leave untouched the new round of cuts on Jan. 15 that would reduce the amount to $967 billion. Democrats want to figure out a way to undo the reductions, plus a long-term extension of the debt limit increase and a short-term spending bill to reopen the government.

"Republicans want to do it with entitlement cuts," said Sen. Chuck Schumer, D-N.Y. "Democrats want to do it with a mix of mandatory cuts, some entitlements and revenues. And so how do you overcome that dilemma? We're not going to overcome it in the next day or two."


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