WASHINGTON (AP) — Republicans and Democrats in Congress failed to make any significant progress toward a deal Saturday even as a threatened default by the Treasury crept uncomfortably closer and a partial government shutdown neared the end of its second week.
Lawmakers in both parties said they were watching for the reaction to the political uncertainty by the financial markets when they reopen after the weekend.
The International Monetary Fund's policy committee said Saturday that the United States needed to take "urgent action to address" the uncertainties created by the budget impasse, particularly the threat of a default.
Global finance officials were nervously monitoring talks to end the U.S. budget impasse during their three days of discussions, held around the annual meetings of the 188-nation IMF and its sister lending agency, the World Bank.
"I think it is unthinkable that an agreement won't be found," Mario Draghi, head of the European Central Bank, told reporters Saturday. "If this situation were to last a long time, it would be very negative for the U.S. economy and the world economy and could certain harm the recovery."
There are two issues at play: the U.S. government has been partially shut since Oct. 1 because of Congress' failure to pass a normally routine temporary spending bill. Separately, Obama wants Congress to extend the government's borrowing authority — another matter that usually had been routine.
The focus of efforts to end the government shutdown and prevent a U.S. default shifted to the Senate on Saturday, where Senate leaders were in bipartisan talks aimed at resolving the twin stalemates.
"We haven't done anything yet" by way of compromise, Senate Majority Leader Harry Reid said, although he and other Democrats said repeatedly there was reason for optimism.
Across the Capitol, a member of the hardcore conservative tea party caucus, Republican Rep. John Fleming, said there was "definitely a chance that we're going to go past the deadline" that Treasury Secretary Jacob Lew has set for Congress to raise the $16.7 trillion debt limit.
President Barack Obama met with Senate Democratic leaders at the White House after accusing Republicans of practicing the politics of extortion. "Manufacturing crises to extract massive concessions isn't how our democracy works, and we have to stop it," Obama said in his weekly radio and Internet address.
Ironically, though, House Republicans who triggered the shutdown with tea party-driven demands to eradicate Obama's health law conceded that they had temporarily been reduced to virtual bystander status.
"The Senate needs to hold tough," Republican Rep. Greg Walden quoted Speaker John Boehner as telling House Republican lawmakers in a private meeting Saturday morning. "The president now isn't negotiating with us."
One day after talks between the White House and House Republicans fizzled, the focus turned to the Senate.
There, a meeting of Reid, Republican Senate Leader Mitch McConnell and two other lawmakers produced no immediate sign of progress.
"The only thing that's happening right now is Sen. Reid and Sen. McConnell are talking. And I view that as progress," said the second-ranking Republican senator, John Cornyn of Texas.
Senate Democrats rejected a stab at compromise led by moderate Republican Sen. Susan Collins, while Republicans blocked the advance of a no-strings attached measure the Democrats drafted to let the Treasury resume normal borrowing. The party line vote was 53-45, seven short of the 60 required under Senate procedural rules.
In disagreement was a pair of issues, both important and also emblematic of a broader, unyielding dispute between the political parties over spending, taxes and deficits.
Lew has said that without legislation to raise the debt limit, the government will deplete its ability to borrow money, risking a first-time federal default that could jolt the world economy.
A separate measure was needed to reopen the government fully after 12 days of a partial shutdown that has resulted in furloughs for 350,000 federal workers and that administration officials warn could spread hardship if it remains in effect.
Politicians agreed passage of both was essential.
But Republicans demanded concessions that Democrats were unwilling to give — unless they could get something in return.
Officials in both parties said that Reid had raised the possibility with Republicans of a long-term spending bill that included deficit savings that could replace some or all of the across-the-board spending cuts that began taking effect at the beginning of the year.
The political calculations were evident. Polls show all portions of the electorate except tea party supporters are increasingly displeased, and Republicans are bearing the brunt of their unhappiness with favorability ratings at record lows.
"Perhaps he sees this as the best opportunity for him to win the House in 2014," Fleming said of the president. "It's very clear to us he does not now, and never had, any intentions of negotiating."
Reid was harsh in his language.
Republicans had begun seeking concessions on the new health care law, he said, and now their No. 1 issue is "to divert attention from the fools they've made of themselves on Obamacare."
House Democrats lined up en masse to sign a legislative petition calling on Boehner to allow a vote on a bill to reopen the government, a step he has repeatedly refused to take.
In his Saturday address, Obama said, "Politics is a battle of ideas, but you advance those ideas through elections and legislation — not extortion."
Obama has said repeatedly in recent weeks that he is willing to negotiate with Republicans on budget, health care or other issues, but only after the government is reopened and the debt limit is raised. He wants to dissuade the opposition party from using the threates of a government shutdown or debt default as leverage to extract concessions.
Collins' suggested compromise had gained traction in recent days, before Reid told McConnell it was a nonstarter.
In a statement, the she called the response unfortunate, and said talks on the plan involving senators of both parties "were constructive and give me hope that a bipartisan solution to reopen government and prevent default is within our reach."
Her proposal could have raised the debt limit through Jan. 31 and reopened the government for six months.
At the same time, it would have granted federal agencies flexibility in adjusting to the across the board cuts, and made two changes in the health care law.
One would have set new income verification conditions on individuals applying for federal subsidies for coverage; the other would have suspended a medical device tax for two years.
The shutdown, meanwhile, has sent ripples nationwide.
State governments have started laying off employees whose programs depend on federal funding and warning of thousands of additional furloughs if the budget stalemate is not resolved soon.
At the same time, some states have begun putting up their own funds to temporarily reopen national parks after the Obama administration said they could do so if they understood they would not be reimbursed. The states want to stem the loss of tourist money that flows when the scenic attractions are open.
Tourists returned to the Grand Canyon in Arizona on Saturday, and the Statue of Liberty in New York harbor will reopen to the public on Sunday. Mount Rushmore in South Dakota, Rocky Mountain National Park in Colorado, and Zion National Park in Utah were among other landmarks scheduled to reopen by Monday.
Associated Press writers Andrew Taylor, Jim Kuhnhenn, Alan Fram and David Espo contributed to this report.