The sun rises on the U.S. Capitol dome as the prayer group Faithful Filibuster — Carol Busroe, Gary Cook, Jim Wallis and Ray East — pray for a solution to end the shutdown and extend the Treasury Department’s borrowing power. 
 
 Oct. 16, 2013 The sun rises on the U.S. Capitol dome as the prayer group Faithful Filibuster — Carol Busroe, Gary Cook, Jim Wallis and Ray East — pray for a solution to end the shutdown and extend the Treasury Department’s borrowing power. Melina Mara/The Washington Post 
 
 The federal government is in the third week of a shutdown while Congress worked out a deal to fund its operations and to avoid a possible default because of the debt limit. 
 
 Meanwhile, furloughed federal workers express their displeasure as the government shutdown headed into its third week. 
 
 Meanwhile, furloughed federal workers express their displeasure as the government shutdown headed into its third week. 
 
 What started as a mad dash to strike a deal to lift the federal debt limit slowed to a crawl over the weekend as stalemated Senate leaders waited nervously to see whether financial markets would plunge Monday morning and drive the other side toward compromise. 
 
 Republicans seemed to think they had more to lose. After talks broke down between President Obama and House leaders, GOP senators quickly cobbled together a plan to end the government shutdown — now entering its third week — and raise the $16.7 trillion debt limit. Senate Minority Leader Mitch McConnell (R-Ky.) then asked Majority Leader Harry M. Reid (D-Nev.) to elevate negotiations to the highest level. 
 
 On Sunday — with the Treasury Department due to exhaust its borrowing power in just four days — Reid was wielding that leverage to maximum advantage. Rather than making concessions that would undermine Obama’s signature health-care initiative, as Republicans first demanded, Democrats are now on the offensive and seeking to undo what has become a cherished prize for the GOP: deep agency spending cuts known as the sequester. 
 
 Reid and McConnell spoke only once Sunday, a telephone call in the afternoon, aides said. As he closed a rare Sunday session of the Senate, Reid characterized the conversation as “productive” and “substantive.” 
 
 “I’m optimistic about the prospects for a positive conclusion to the issues before this country today,” he said. 
 
 With legislative action stalled on Capitol Hill, lawmakers are getting creative with where they shine the spotlight on the government shutdown. (The Washington Post) 
 
 But the shift in focus away from the imminent threat of a first-ever default on the U.S. debt sparked outrage among Republicans and alarm among the world’s financial leaders, meeting this weekend in Washington. 
 
 Christine Lagarde, managing director of the International Monetary Fund, warned on NBC’s “Meet the Press” that a failure by the United States to make scheduled payments to investors “would mean massive disruption the world over. And we would be at risk of tipping yet again into a recession.” 
 
 Republicans, meanwhile, said any agreement to back away from the sequester cuts would be opposed by GOP senators and doomed in the Republican House. 
 
 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.” 
 
 Democrats insisted that they have no interest in rolling back the sequester cuts now. Reid noted that the Senate had already approved and sent to the House a measure that would leave the cuts in place through the middle of November, with “not a word about breaking [spending] caps,” Reid said on the Senate floor. 
 
 Instead, Democrats said they objected to a debt-limit plan developed by Sen. Susan Collins (R-Maine) because it would permit the cuts to stay in place through March, allowing another round of sequester cuts to hit on Jan. 15. 
 
 At that point, agency spending for fiscal 2014, which began Oct. 1, would be on track to fall roughly $90 billion lower than Democrats have proposed. And with the fiscal year half over, Democrats would have scant opportunity to renegotiate the numbers, a top priority. 
 
 On Sunday, Democrats familiar with the talks said Reid was pressing McConnell to accept a quicker deadline on a temporary measure to fund federal agencies and reopen the government and a longer deadline for raising the debt limit. Collins’s proposal would extend the Treasury Department’s borrowing authority only until the end of January. 
 
 “The plan would be, open up the government immediately for a period of time before the sequester hits [on Jan. 15] and then have serious discussions where we might be able to undo the sequester,” Sen. Charles E. Schumer (D-N.Y.), the No. 3 Democrat in the Senate, said on CBS’s “Face the Nation.” “I’m optimistic that could work.” 
 
 Schumer noted that House Republicans have already offered to roll back the sequester cuts in a proposal the White House rejected Friday. That plan would have immediately suspended enforcement of the debt limit and reopened the government in exchange for a plan to replace sequester savings in 2014 (and perhaps longer) with reductions to Social Security and Medicare proposed in Obama’s budget. 
 
 “That was one place where the House Republicans and the president were not, you know, at total loggerheads,” Schumer said, suggesting that a deal could be cut if Republicans would consider new revenue along with cuts to entitlement programs. 
 
 McConnell appeared to be far less optimistic. The sequester cuts are part of $2.1 trillion in agency spending cuts over 10 years included in the Budget Control Act, the measure that raised the debt limit in 2011. Initially, Republicans, too, wanted to replace the sequester, particularly the portion that falls on the Pentagon. But since Obama won tax hikes on the wealthy as part of a year-end fight over the “fiscal cliff,” McConnell has taken to casting the sequester as a significant GOP victory from which the party cannot retreat. 
 
 “I think our main goal going into the year-end discussion is to not walk away from the bipartisan agreement that we made two years ago to reduce spending,” he told reporters this summer. 
 
 On Sunday, McConnell maintained a stony silence, failing to show up at the Capitol for his usual opening speech on the Senate floor. Instead, he issued a statement throwing his support for the first time behind the Collins proposal, calling it a “bipartisan plan” brokered with five other GOP senators and six senators who caucus with Democrats. 
 
 “It would reopen the government, prevent a default . . . and maintain the commitment that Congress made to reduce Washington spending through the Budget Control Act — the law of the land,” McConnell said. “It’s time for Democrat leaders to take ‘yes’ for an answer.” 
 
 Some Democrats tend to agree with McConnell. During a caucus meeting Saturday, Reid and his leadership team spent more than an hour arguing to Democrats anxious about default that the Collins plan is not a good deal for the party. On Sunday, Sen. Joe Manchin III (W.Va.), one of the Democrats working with Collins, defended the proposal on “Fox News Sunday” as having “a little bit of move for everybody. In a divided government, you can’t have it all your way.” 
 
 Soon after McConnell’s statement appeared, however, the Collins collaborators hustled into Reid’s office just outside the Senate chamber. Some of them were still inside when a joint statement was issued on behalf of Sens. Heidi Heitkamp (D-N.D.), Mark Pryor (D-Ark.), Amy Klobuchar (D-Minn.), Angus King (I-Maine) and Joe Donnelly (D-Ind.) “responding to Senator McConnell’s comments.” 
 
 “We have been involved in productive, bipartisan discussions with Senator Collins and other Republican senators,” the statement said, “but we do not support the proposal in its current form.” 
 
 An hour later, an update appeared adding Manchin’s name. “NOTE,” it said: “Senator Manchin was unavailable when the original statement was sent out.” 
 
 Treasury Secretary Jack Lew has said that if Congress fails to lift the debt limit, he will exhaust his borrowing authority on Thursday. At that point, he will have to rely on a cash balance of about $30 billion and incoming revenue to pay the nation’s bills. 
 
 Independent analysts say 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 — perhaps the most important payments from the perspective of global markets — on Oct. 31. 
 
 Still, many lawmakers are leery of missing the Thursday deadline — particularly Republicans, who are already getting hammered in public opinion polls over the government shutdown. The Dow Jones industrial average soared Friday on news that Obama and congressional Republicans were finally talking. 
 
 “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.” 
 
 Jeff Simon contributed to this report. ||||| 4 months ago 
 
 Washington (CNN) – As the House makes its next move in the ongoing fight to end the government shutdown and avoid a default, the House Democratic campaign arm will target Republicans in 60 districts on Wednesday, blaming them for a possible downgrading of the government's rating with a Wall Street bond-firm. 
 
 Rating agency Fitch on Tuesday warned of a downgrade of gold-plated U.S. bonds, citing "political brinkmanship" as the reason for the default risk. 
 
 
 
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 Fitch still has the U.S. rated AAA, the highest possible grade, but the country is now on "rating watch negative," meaning that there is increased possibility of a downgrade in the near future. 
 
 CNNMoney.com: Debt ceiling countdown: What happens next 
 
 On the eve of the deadline to raise the debt limit, Congress has yet to reach an agreement. 
 
 The Democratic Congressional Campaign Committee will send releases that name 60 Republicans whose "reckless brinkmanship" led to the Fitch warning. 
 
 "This is it – today is the last opportunity for Congressman (Name) to end the reckless antics and focus on responsible solutions or else he will have turned America into a deadbeat nation," Emily Bittner of the DCCC says in the release. 
 
 It's the latest round of attacks between the two political parties in the Congressional stalemate. 
 
 Republican Rep. Steve King of Iowa said Democrats, not Republicans, are the ones at fault for the country teetering on the edge of an important deadline for the economy. 
 
 "(House Republicans) put an offer on the table, and then (Senate Majority Leader) Harry Reid rejected it. Then another offer, another offer, another offer. Actually four offers out there before we started in the incremental financing component of this," he said Wednesday on CNN's "Day Day," adding that the President and Senate Democrats have "refused to negotiate in each step of the way." 
 
 The Democratic-led Senate refused to take up any measure that tied changes to Obamacare to must-pass spending legislation, a strategy Republicans used to try and chisel away at the president's signature health care law. 
 
 – CNN Political Editor Paul Steinhauser and CNN Money's James O'Toole contributed to this report. ||||| WASHINGTON—The Obama administration believes congressional leaders must agree to a deficit-reduction deal by July 22 in order to raise the government's borrowing limit in time to avoid a default in early August, according to Democratic officials with knowledge of the negotiations. 
 
 The government needs a week or two to write and pass the necessary legislation and take the steps necessary to avoid missing a payment. "We're down to the wire," one official said. 
 
 President Barack Obama and Senate leaders have agreed on the outline of an agreement to cut federal spending by about $1 trillion over at least 10 years, but are deadlocked over whether to include some tax increases, as Democrats insist, or take them off the table, as Republicans want. The Senate agreed Thursday to cancel its planned recess next week to stay in town in pursuit of an agreement. Still, many disagree about what would happen if they don't reach a deal, and it is hard to know for certain because the federal government hasn't defaulted in modern times. 
 
 Some, including top officials at the Treasury Department and the Federal Reserve, say the consequences of failing to raise the $14.29 trillion debt limit by Aug. 2 would be catastrophic, with the U.S. government unable to meet all its financial obligations, interest rates soaring, thousands of businesses filing for bankruptcy and hundreds of thousands of people losing their jobs almost overnight. 
 
 "If we didn't pay our bills, it would plunge the United States not into a recession, not into the so-called double-dip recession, but into a full-blown depression," Senate Majority Leader Harry Reid (D., Nev.) said Thursday. 
 
 The International Monetary Fund said this week that failing to raise the ceiling would send "a severe shock to the economy and world financial markets." 
 
 But skeptics have said the impact is much less certain and would depend in large part on whether the White House could avoid defaulting on its debt by continuing to make interest payments to bondholders, such as China. The Obama "administration insists on pretending that...as soon as the first employee is furloughed there will be a catastrophic collapse of the markets because the world will see the U.S. government in default," said Sen. Pat Toomey (R., Pa.). "That's ridiculous." 
 
 White House officials emphasized this week that they wouldn't choose which payments to make and which to suspend if the debt ceiling isn't raised, with Treasury Secretary Timothy Geithner calling the idea "unwise, unworkable, unacceptably risky, and unfair to the American people." 
 
 The federal government hit the debt ceiling in May but has been able to keep operating through a series of emergency funding maneuvers. But Treasury officials say if the government cannot borrow more by Aug. 2, they won't have enough cash to pay all the government's bills. Many members of Congress say they won't vote to lift the debt cap without first reaching an agreement to reduce the federal deficit over the next decade. 
 
 Without a debt-ceiling increase, the Treasury would face several immediate challenges, with $23 billion in Social Security benefits checks due Aug. 3, $90 billion in government debt maturing Aug. 4, and more than $30 billion in interest payments due Aug. 15. 
 
 A key test would be whether Treasury would be able to replace $467 billion in existing debt that matures in August. Investors might shun the new debt as too risky or demand sky-high interest rates. "If they didn't increase the debt ceiling, then truly horrific things would happen both in financial markets and the economy over all," said David Kelly, chief market strategist at J.P. Morgan Funds. 
 
 The consequences would play out in two ways. First, experts believe some sort of "trigger" event would move stock and bond markets, either before or after Aug. 2. Such an event could occur if a rating agency downgraded U.S. government debt, as several have threatened to do in recent weeks. Because Treasury yields are a benchmark for other interest rates, borrowing costs could soar on mortgages, credit cards, business loans and other forms of credit, and send the stock market plummeting. 
 
 Moody's Investors Service said Wednesday if the federal government defaults on its debt, the firm would downgrade its ratings on the other debt linked to Treasurys, such as bonds issued by cities, towns, and large banks, immediately driving up their costs of borrowing. 
 
 The second event would begin Aug. 3, with an immediate and unprecedented drop in federal spending, as the government stopped making payments to Social Security beneficiaries, government workers, Pentagon contractors, and others. 
 
 One reason the consequences remain unclear is because the government would continue to collect taxes in August, giving the Treasury Department enough money to meet more than half its commitments. In August 2010, Treasury brought in $164 billion in revenue for the month, which covered roughly 65% of its spending. 
 
 But reducing federal spending by 44% could mean laying off one-third of the federal work force, said Jay Powell, a visiting scholar at the Bipartisan Policy Center and former top Treasury official during the George H.W. Bush administration. "That's 600,000 or 700,000 workers." 
 
 —Naftali Bendavid contributed to this article. 
 
 Write to Damian Paletta at damian.paletta@wsj.com ||||| (CNN) -- After 24 hectic hours, Congress was back where it started Tuesday night -- with Republicans and Democrats in the Senate near a deal to end to the U.S. budget standoff, while House Republicans can't agree among themselves. 
 
 Meanwhile the U.S. government is creeping closer to potentially defaulting on its debt, something the Treasury Department says will happen Thursday if there's no pact to hike the nation's borrowing limit. To this point, the Wall Street bond-rating firm Fitch has warned of a downgrade of gold-plated U.S. bonds, citing the default risk from "political brinkmanship." 
 
 The economic nightmare from the possible debt default could compound the pain tied to the ongoing partial government shutdown, which enters its 16th day on Wednesday. 
 
 The political bickering, and lack of progress, has been going on even longer. 
 
 What's changed in recent days is that, in the Senate at least, Democrats and Republicans are working together toward a resolution. Spokesmen for Sen. Harry Reid and Sen. Mitch McConnell -- their chamber's majority leader and minority leader, respectively -- said Tuesday night that negotiations had restarted to create legislation to fully reopen the government and raise the debt ceiling. 
 
 Senate staffers worked into the night drafting a framework bill, though no announcement is expected before Wednesday, McConnell spokesman Don Stewart said. Still, the movement is clearly positive. 
 
 7 crazy side effects from the shutdown 
 
 "Sen. Reid and Sen. McConnell ... are optimistic that an agreement is within reach," said Adam Jentleson, a spokesman for Reid. 
 
 And shortly after announcing around 10 p.m. Tuesday that the Senate was adjourning until noon Wednesday -- though this wouldn't preclude leaders from saying "something nice" before then to assuage financial markets, a Senate Democratic leadership aide said -- Reid sounded upbeat. 
 
 "We're in good shape," the Nevada Democrat said. 
 
 That optimism, as well as the bipartisan approach, is a far cry from what's happening in the House. 
 
 Sources said Tuesday that House Speaker John Boehner had been "struggling" to come up with enough votes among his own members for a GOP counterproposal to the Senate plan -- even though the Ohio Republican himself said "the idea of default is wrong." 
 
 Rep. Joe Barton, R-Texas, is among those Republicans who said he wouldn't back the measure being floated all day Tuesday, saying that it wouldn't get the 217 required votes to pass given that House Democrats have said they won't support it. 
 
 "There's no structural reform. There's no cost savings," he said. "It's just kick the can down the road another six weeks or two months." 
 
 And if the Senate does pass a bipartisan budget bill, it's no sure thing that legislation would pass the House, if GOP leaders even let it come up for a vote. 
 
 President Barack Obama -- who will meet Wednesday with Treasury Secretary Jack Lew -- called for House Republicans to "do what's right" by reopening government and ensuring the United States can pay its bills, telling CNN affiliate WABC that "we don't have a lot of time." 
 
 Yet even he acknowledged Boehner's difficulty in getting his fellow House Republicans on the same page. 
 
 "(Boehner) negotiating with me isn't necessarily good for the extreme faction in his caucus," Obama told WABC. "It weakens him, so there have been repeated situations where we have agreements. Then he goes back, and it turns out that he can't control his caucus." 
 
 House GOP plan resisted on various fronts 
 
 According to multiple sources, the House plan would have called for funding the government through December 15 to end the partial shutdown. It also would increase the federal debt ceiling until February 7. 
 
 In addition, the House GOP version would've included a provision demanded by tea party conservatives prohibiting federal subsidies for the President, his administration's officials, members of Congress and their respective staffs to use toward purchasing health insurance under Obama's signature health care reforms. 
 
 Veterans rally against shutdown 
 
 Republicans dropped demands to include two other provisions related to Obamacare. One would have delayed a tax on medical devices proponents say is needed to help pay for the Affordable Care Act, and the other would have tightened income verification of those seeking subsidies to purchase health insurance. 
 
 The House proposal also would have forbidden the Treasury from taking what it calls extraordinary measures to prevent the federal government from defaulting as cash runs low, in effect requiring hard deadlines to extend the federal debt ceiling. 
 
 Two senior House GOP sources told CNN's Deirdre Walsh the House GOP counterproposal would have been passed in a way to let the Democratic-led Senate to strip provisions with a simple majority. Walsh and CNN Chief Congressional Correspondent Dana Bash explained that would make it harder for tea party conservatives such as GOP Sen. Ted Cruz of Texas to delay or derail the agreement. 
 
 Whether this GOP plan is dead or not isn't known. As he left the Capitol, House Majority Leader Eric Cantor of Virginia said only that there would be "no votes tonight. We'll see you in the morning." 
 
 But one thing, for sure, is that Democrats -- including the White House, which has rejected the House GOP effort -- would have nothing to do with it. 
 
 House Minority Leader Nancy Pelosi on Tuesday called the proposal "a decision to default." And speaking on the Senate floor, Reid said, "Extremist Republicans in the House of Representatives are attempting to torpedo the Senate's bipartisan progress with a bill that can't pass the Senate." 
 
 Even Sen. Bob Corker, R-Tennessee, said it was time to get a deal done after lengthy delays he blamed on the unrealistic goal set by GOP conservatives of gutting Obamacare. 
 
 "The fact is we've got to figure out a way to move ahead," he told CNN's "New Day" on Tuesday. "In fairness, on our side of the aisle, we've wasted two months, focused on something that was never going to happen." 
 
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 The Senate is indeed moving ahead, with legislation that would give Republicans some concessions while overall being closer to what Obama and fellow Democrats have long pushed for regarding government funding and the debt ceiling. 
 
 The fight began when Republicans -- paced by Sen. Ted Cruz of Texas -- insisted that they'd only allow the government to open fully into the start of the fiscal year October 1 with amendments to defund or delay Obamacare. 
 
 Alas, the only element of the Affordable Care Act that would change under the pending Senate deal is an anti-fraud provision requiring income verification for people getting federal subsidies, according to a Democratic source. 
 
 Proposed budget deal barely dents Obamacare 
 
 Even if a deal is finalized soon, that doesn't mean it will become law right away. 
 
 The earliest a vote might happen is late Thursday or in the pre-dawn hours of Friday, assuming Boehner sends a "message" allowing the Senate to expedite its vote. 
 
 If there's not unanimous consent by senators -- in other words, if a tea party conservative like Cruz has an issue -- a final vote would be pushed to Saturday, at the earliest. The delay for a final Senate vote could stretch seven to 10 days, if some chamber members throw up yet more procedural hurdles. 
 
 The prolonged legislative process, not to mention the threat of yet more stalemate, could wreak havoc in financial circles. 
 
 The partial shutdown has proved costly, leaving hundreds of thousands of federal employees are either idle at home or not being paid while working not to mention the costs of shuttered aid programs and closed parks. 
 
 And it's not just Americans who could be impacted without action to address the U.S. government's debt situation. 
 
 Jon Cunliffe, who will become the deputy governor of the Bank of England, told British lawmakers over the weekend that banks should begin planning for contingencies. 
 
 And officials warn that tough choices are ahead about which bills to pay and which to let slide, should the shutdown and debt ceiling debate drag on. 
 
 Even before the deadline, the stalemate was taking its toll. Mark Zandi of Moody's Analytics told CNN's Christine Romans on Tuesday that the standoff has cost the economy about $20 billion in gross domestic product. GDP is a measure of the goods and services produced by an economy. 
 
 Has shutdown affected you? Share your story with CNN iReport. 
 
 CNN's Craig Broffman, Jason Hanna, Greg Clary, Mark Preston, Dan Merica, Brianna Keilar and Janet DiGiacomo contributed to this report.
– As the government shutdown enters its third week, Senate leaders appear to be waiting for world financial markets to give them a jolt before they make a deal, the Washington Post reports. Harry Reid and Mitch McConnell had a conversation yesterday that Reid says left him "optimistic about the prospects for a positive conclusion." But there's no indication of what a compromise might look like, and Democrats are now pushing for a deal that would lift the sequester budget cuts, showing what the New York Times calls a "newfound aggressiveness." The sequester demand has Republicans frustrated. "The Democrats keep moving the goal posts," complains Sen. Susan Collins, the centrist GOP senator whose plan to resolve the crisis was rejected. Bob Corker agreed, saying of lifting the cuts, "I just can't imagine how that has any possibility of becoming law." The Post worries that the increasingly bitter McConnell-Reid feud could deep-six the deal. Things have gotten so bad that their colleagues recently held "the equivalent of an intervention," the paper says. World Bank and International Monetary Fund leaders urged the US to hurry up and forge a deal, with IMF director Christine Lagarde warning that "massive disruption the world over" looms. A foreign ministry spokesman in China called for American lawmakers to "shoulder their responsibilities," Reuters reports, and a scathing editorial in China's Xinhua state news agency called for politicians to end the "pernicious impasse"—and for everybody else to "start considering building a de-Americanized world." Claims that America has never defaulted on its debt are part of every debt-limit battle but the US has stiffed its creditors at least twice, the AP finds. In 1814, the government ran out of gold and silver to pay interest to bondholders in New England after setbacks in the War of 1812, and in 1979, a technical glitch that followed a long debt-limit squabble caused a delay in redeeming maturing T-bills that ended up adding about $12 billion to the cost of servicing the national debt.