The top Republican in the Senate said Congress and the White House were very close to a deal on raising the limit on U.S. borrowing that would avert an unprecedented default on America's debt, ending one of the nastiest partisan fights in recent memory.
Senate Majority Leader Mitchell McConnell said he was very close to being able to recommend the tentative agreement to Republicans in the upper chamber. It would, he said, likely extend U.S. borrowing authority, which expires on Tuesday, beyond the 2012 presidential and congressional elections, a fundamental demand of President Barack Obama.
At the same time, the agreement would include none of tax increases Obama has sought and Republicans had steadfastly rejected. It also includes, he said, the requirement that both houses of Congress vote on a constitutional amendment to balance the budget. That outcome of that vote, however, would have no effect on raising the debt limit.
Democratic Sen. Chuck Schumer, however, said there still was no deal and talks on many issues still needed to be settled. Although he said there was "relief" in Congress and the White House because serious negotiations were no making headway.
The deal, negotiated late Saturday night, would raise the nation's debt limit would rise in two steps by about $2.4 trillion and spending would be cut by a slightly larger amount, according to officials close to the talks. The first stage — about $1 trillion — would take place immediately and the second later in the year.
The officials who described the talks did so on condition of anonymity, citing their sensitive nature.
Obama is seeking legislation to raise the government's $14.3 trillion debt limit by enough to tide the Treasury over until after the 2012 elections. He has threatened to veto any legislation that would allow a recurrence of the current crisis next year but has agreed to Republican demands that deficits be cut — without tax increases — in exchange for additional U.S. borrowing authority.
Without a compromise in place by Tuesday, administration officials say the Treasury will run out of funds to pay all the nation's bills. The subsequent default could prove catastrophic for the U.S. economy by causing interest rates to rise and financial markets to sink, sending shockwaves around the world, they say. With financial markets closed for the weekend, lawmakers had a little breathing room, but not much. Asian markets begin opening for the new work week when it is late Sunday afternoon in the U.S. capital.
"There is very little time" Obama said Saturday in his weekly radio and Internet address. He called for an end to political gamesmanship, saying "the time for compromise on behalf of the American people is now."
One official commenting on the late night negotiations said the two sides had settled on general concepts, but added there were numerous details to be worked out — and no assurance of a final agreement.
Democratic Senate Majority Leader Harry Reid postponed until Sunday a test vote on a his own debt limit proposal that had been scheduled for shortly after midnight to give negotiators time to work out an agreement.
"There are many elements to be finalized," he cautioned. "There is still a distance to go."
With a deal in the works, McConnell said at a joint news conference with House Speaker John Boehner on Saturday that he was confident a deal could be reached "in the very near future and resolve this crisis in the best interests of the American people."
Reid, after a meeting at the White House with Obama and House Democratic leader Nancy Pelosi, had initially disagreed with that optimistic assessment.
Obama needs Congress to approve an increase in the government's borrowing authority, in the past increases have been routine, but Republicans, citing the giant U.S. deficit, have demanded huge spending cuts as a condition for approving the increase.