Lawmakers inched closer Wednesday to an end to the current political stalemate that has shut down the federal government and threatened to cause a credit default that could force the still fragile economy into a tailspin.
After a stunning failure by House Speaker John Boehner to rally enough conservatives to pass their own legislation, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell resumed talks to finish off the deal they largely crafted Monday night. It would reopen the federal government through Jan. 15, increase the debt limit to Feb. 7, and create a budget committee made up of House and Senate members to work on a longer term funding agreement by mid-December, according to reports. Furloughed workers would get back pay as a part of the package and at Republicans' behest it would require income verification for Americans receiving health care subsidies through the Affordable Care Act.
The deal does not include a provision pushed for by Sen. David Vitter, R-La., that would have kept congressional staffers from receiving an employer subsidy – in this case the federal government – to help pay for their health insurance they must obtain through a national marketplace called an exchange.
Senate Republicans were scheduled to meet at 11 a.m. to discuss the plan with Democrats having their own meeting separately. But even though it's a Senate negotiated package, the House will likely take up a vote first to expedite the process and prevent Senate conservatives, such as Sen. Ted Cruz, R-Texas, from holding things up. Senate leadership is expected to announce the deal on the floor at noon Wednesday and the House is expected to move ahead with it later in the day.
Cruz, who led the charge on shutting down the government as a means of defunding or debilitating President Barack Obama's health care law, has been absent from cable news and the Senate floor in recent days, though he had been a fixture leading up to this week. He reportedly held a meeting with House conservatives at a local D.C. restaurant Monday night to press them to hold the line against any pending deal.
But things crumbled for House leadership trying to cobble something together Tuesday when conservative groups such as Heritage Action for America, an activist group associated with the Heritage Foundation, encouraged members to oppose the emerging deal, according to House Republican staffers.
"That was the death knell, I think," said one staffer, speaking on background.
Many economists feared a potential credit default, predicted by White House officials to occur Thursday, would cause a panic on Wall Street akin to the 2008 financial crisis that occurred when the House failed a vote to bail out floundering financial institutions. Tuesday afternoon, as the House lurched toward failure, Fitch Ratings placed the United States' AAA financial rating under review for a downgrade.
"The U.S. authorities have not raised the federal debt ceiling in a timely manner before the treasury exhausts extraordinary measures," a Fitch press release said. "The U.S. treasury secretary has said that extraordinary measures will be exhausted by Oct. 17, leaving cash reserves of just $30 billion. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default."
Mark Zandi, chief economist at Moody's Analytics, said the markets' fear of unpredictability due to two sweeping measures passed under Obama – the Dodd-Frank financial regulation and Obamacare – would fade in the next year or two, but concerns have been replaced by the governing uncertainty currently on display.
"We really need for Washington to get out of the way, get off of the front page of The New York Times and the Wall Street Journal," he said at a breakfast event hosted by the Third Way.