The US House votes tonight on a plan to avert an American default, but conservatives in the Republican-dominated lower chamber, Senate Democrats and President Barack Obama were all lined up against the measure.
Fears that the deadlock won't be broken pushed global stock markets down yet another day as investors worried that a dysfunctional Congress might remain gridlocked past the Tuesday deadline to raise the debt limit. US stocks were falling all week but were buoyed today by positive unemployment news. European markets were down and Japan's Nikkei average fell almost 1.5 percent.
Without legislation in place by the deadline, the Obama administration says the Treasury will not be able to pay all the nation's bills, possibly triggering a default that could prove catastrophic for an economy still recovering from the worst recession since the 1930s Great Depression. That would have major global consequences for the world's increasingly interconnected economies.
Deciding whether to support Speaker John Boehner's plan to raise the government's cap on borrowing, known as the debt ceiling, in exchange for trillions of dollars in federal spending cuts has vexed newly empowered House Republicans more than any other question in the seven months since they assumed control of the lower chamber and promised to upend the old order in Washington.
Some in the conservative tea party movement that helped propel the Republican gains in the 2010 elections concluded that Boehner already had betrayed them by negotiating with Obama on possibly increasing government revenues — meaning taxes — as part of a debt deal. But others said he deserved more time to put things right.
Divisions inside the Republican caucus could tarnish the party's deficit-slashing brand and chances for victory in the 2012 elections, when Obama also faces re-election.
After weeks of wrangling, however, Boehner appeared to have made some progress with conservatives who were angry that the bill didn't cut spending enough.
"We're getting there," he said, ahead of tonight's scheduled vote. The bill had been hastily rewritten to force deeper spending cuts.
But some House conservatives still can't swallow the Boehner legislation.
First-term Rep. Joe Walsh told CBS television Thursday morning he didn't think the Boehner proposal or a rival plan offered by Senate Democratic Leader Harry Reid cut federal spending sufficiently.
"Right now, I can't," he said when asked if he would vote for the Boehner legislation, but the tea party-backed lawmaker said he was still thinking about it. Walsh said he doubted the importance of the deadline, saying "we've got plenty of revenues in August to service our debt."
Even if that were true, it doesn't take into account huge federal obligations for American pensioners who rely on Social Security payments each month, benefits to military veterans or businesses large and small that do work for the government.
The White House disparaged the Republican bill, and Reid in the Democratic-controlled upper chamber was even more emphatic. He called it a "big wet kiss for the right wing."
As the Senate convened Thursday Reid said: "Default will rock our financial system to its core."
The White House has threatened a veto, saying the bill does not meet Obama's demand for an increase in the debt limit large enough to prevent a rerun of the current crisis next year, in the heat of the 2012 election campaign.
Obama supports an alternative drafted by Reid that also cuts spending yet provides enough additional borrowing authority to tide the government over through 2012. The Senate measure does not include an increase in tax revenue, which had been a key Obama requirement until now.
But White House adviser David Plouffe signaled that a melding of the two bills could be the compromise that averts a crisis.
"What you're going to have to do is reconcile what's in Reid and Boehner, which is a lot of the things the president has talked about in terms of spending cuts he'd be willing to accept. And that's where the compromise is," Plouffe said in an interview on MSNBC.
Sen. Minority Leader Mitch McConnell said he did not believe Obama would follow through on his threat to veto the House measure.
"It's inconceivable to me that the president would actually follow through on this threat," McConnell, a Republican, said Thursday. "After all, the president's first responsibility is to do what's best for the country, not his re-election campaign. Same goes for the Senate Democrats."
McConnell accused Democrats of "playing with fire" in planning to block the Boehner proposal in the Senate.
While Boehner holds out hope that the Senate will pass his measure, a more likely outcome is a last-ditch effort to find a compromise.
In fact, Boehner's plan has enough in common with Reid's — including the establishment of a special congressional panel to recommend additional spending cuts this fall — that Reid hinted a compromise could be easy to pull together quickly.
"Magic things can happen here in Congress in a very short period of time under the right circumstances," Reid told reporters.