After House stalls, Dems and GOP in Senate reboot shutdown, debt plan talks

Jake Tapper has the latest breaking news on the shutdown on “The Lead” at 4 p.m. ET and a special report “Shutdown Showdown” at 11 p.m. ET on 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.

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“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.

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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.

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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.

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CNN’s Craig Broffman, Jason Hanna, Greg Clary, Mark Preston, Dan Merica, Brianna Keilar and Janet DiGiacomo contributed to this report.