US Senate blocks latest Republican debt plan

US lawmakers, facing a potentially calamitous government default in just days, held votes that highlighted their intense partisan divide and did little to end a torturous political standoff.

The Republican-led House of Representatives yesterday approved a plan to temporarily raise the government's borrowing authority, knowing it was headed to certain defeat in the Democratic-controlled Senate. Less than two hours later, the Senate voted it down.



Top congressional leaders and the White House now have little time to work out a compromise that can pass both chambers of Congress and be signed by President Barack Obama before a Tuesday deadline to avoid default.



Prospects for a compromise were complicated by last-minute changes to the House bill made by Republican leaders yesterday to win over rebellious members of their party.



Tuesday is when the government says it will run out of money to meet its financial obligations. It needs Congress to approve an increase in its borrowing authority, known as the debt ceiling. Past increases have been routine, but Republicans, citing the giant US deficit, have demanded huge cuts as a condition for approving the increase.



Democrats have agreed to major cuts, but are insisting that the debt issue be settled now and not come up again during the November 2012 elections to prevent another potential default during the heat of the campaign.



House Republicans want a short-term increase and another vote next year. In a last-minute addition to its bill, the House would require a second increase unless Congress approves a balanced budget-amendment to the Constitution and sends it to the states for ratification.



Democrats have strongly opposed that provision, which has little chance of winning congressional approval.



A US default would have a ripple effect on the global economy and send interest rates soaring. Already, concerns about the impasse have sent world stock markets spiraling lower.



Just after the Senate vote, Democratic leader Harry Reid signaled he would push ahead with his own plan even though it, too, had little chance of passing when it reaches the House.



Both the Republican and Democratic bills, however, could provide the basis for behind-the-scenes talks by congressional leaders aimed at finding a bipartisan compromise that could win approval in both chambers before Tuesday's deadline.



The top Republican in the House, Speaker John Boehner, had hastily reworked his proposal to cut spending and raise the government's borrowing authority after opposition from his party's most conservative members forced him to postpone votes twice in two previous days.



The House vote was 218-210, almost entirely along party lines. In the Senate, the vote was 59-41, with all Democrats, two independents and six Republicans joining in opposition.



The House plan would have provided a quick $900 billion increase in US borrowing authority — essential to allowing the government to continue paying the bills — along with $917 billion in cuts from federal spending.



The bill had been rewritten with a concession to Tea Party-backed conservatives and others who had thwarted Boehner's attempt to pass the bill Thursday night, upending his endgame strategy. The changes also alienated Democrats only further.



Reid invited Republicans to suggest changes to his bill, saying, "This is likely our last chance to save this nation from default."



The Senate Republican leader, Mitch McConnell, accused Democrats of "rounding up 'no' votes to keep this crisis alive," and noted the House had passed two bills to raise the debt limit and the Senate none.



The House set a vote to reject Reid's proposal on Saturday. The Senate set a test vote for 1 am on Sunday, a middle-of-the-night roll vote that underscored the limited time available to lawmakers.



At the same time Reid appealed for bipartisanship, he and other party leaders accused Boehner of caving in to extremists in the Republican ranks — "the last holdouts of the tea party," Sen. Richard Durbin called them.



The day's economic news began on a downbeat: The economy grew at an annual rate of only 1.3 per cent in the second quarter of the year.



Investors weren't impressed with either the economy or the efforts in Washington. The Dow fell again yesterday, with a loss of 0.8 percent, continuing a weeklong slide that erased nearly 540 points off the index, which closed at 12,143.



At the White House, Obama cited the potential toll on the economy as he urged lawmakers to find a way out of gridlock, declaring that "we're almost out of time."



"The power to solve this is in our hands on a day when we've been reminded how fragile the economy already is," the president said from the White House, as U.S. stocks fell in response to a sour report on economic growth and widespread uncertainty over the Washington debt stalemate. "This is one burden we can lift ourselves. We can end it with a simple vote." AP

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