US Shutdown Continues, Threatens Local, Int’l Economy

Local Editor

Senate leaders struggled to draft an accord that averts a US default and restores full government operations, as the shutdown entered its 13th day with a lapse in borrowing authority four days away.

Senate Majority Leader Harry Reid, who started talks Sunday with Minority Leader Mitch McConnell, said the two had "a productive conversation" this afternoon.

"The discussions were substantive, and we'll continue those discussions," Reid said before the Senate wrapped up almost four hours of debate without a deal being unveiled. "I'm optimistic about the prospects for a positive conclusion."
McConnell of Kentucky issued a statement earlier saying "it's time for Democrat leaders" to support a plan, based on one drafted by Republican Susan Collins of Maine, which Reid, of Nevada, rejected yesterday.

The talks are shifting away from Republican efforts to curtail President Barack Obama's health-care law and to rescind a tax on medical devices to focus on the level of spending and the duration of the deficit-ceiling extension.
While Democratic and Republican senators on Sunday news shows also expressed optimism, there was little tangible evidence as global financial markets begin reacting to breakdown of talks between Obama and House Speaker John Boehner of Ohio.

Meanwhile, democrats warned that a lack of movement this weekend may have an effect on financial markets.

International Monetary Fund Managing Director Christine Lagarde said the congressional deadlock over the US debt ceiling is threatening the US and world economies, and she cautioned against "creative accounting" to avoid default.
"If there is that degree of disruption, that lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over," Lagarde said in an interview on NBC's "Meet the Press" program about the impact of not raising the borrowing limit. "And we would be at risk of tipping, yet again, into recession."
US stock markets will be open on the federal Columbus Day holiday tomorrow. Bond markets will be closed.

At the White House, Obama spent the day calling top lawmakers, including House Minority Leader Nancy Pelosi, and getting briefed by staff about the impact of the shutdown on federal operations, according to aides who spoke on condition they not be identified. Vice President Joe Biden, who played a pivotal role in previous fiscal standoffs, has kept a lower profile during these talks, spending the weekend at Camp David. An aide said he is fully engaged in the discussions.

Obama in his call with Pelosi "reinforced that there must be a clean debt limit increase" -- and a stopgap spending measure also free of policy add-ons -- before budget negotiations can begin, according to a White House statement.
The hurdles to a deal remain the same ones that have bedeviled Congress for a month. Democrats insist that policy changes shouldn't be attached to a debt-ceiling increase and stopgap spending bill. Republicans, internally fractured over strategy, say spending cuts and revisions to the 2010 Patient Protection and Affordable Care Act must occur.

The Senate negotiations also include discussions of easing the spending caps imposed by the across-the-board cuts known as sequestration. Senator Rand Paul of Kentucky, also on CNN, said he and many other Republicans consider spending increases a "nonstarter."
Richard Durbin of Illinois, the second-ranking Democrat in the Senate, said there is a $70 billion spending gap between Democrats and Republicans.

Source: News Agencies, Edited by website team