* New optimism about reaching a compromise
* No deal yet, White House wary of six-week debt extension
* Large parts of the government still closed
* Investors send stocks higher but Treasury bills suffer
By Richard Cowan and Thomas Ferraro
WASHINGTON, Oct 11 President Barack Obama and
congressional Republican leaders inched toward resolving their
fiscal impasse on Friday, but struggled to agree on the length
and terms of a short-term deal to increase the U.S. debt limit
and reopen the government.
Obama met Senate Republicans at the White House and spoke by
phone to House of Representatives Speaker John Boehner as
negotiations intensified on how to get hundreds of thousands of
federal workers back on the job and extend the government's
borrowing authority past the Oct. 17 limit.
It was hard to gauge the progress of talks, as all sides
refused to divulge many of the specific details of what is being
But both sides spoke with new optimism about the possibility
of avoiding a fiscal crisis. Lawmakers were expected to work
through the weekend with a goal of finishing a deal by early
Economists have warned that a debt default would create
global economic chaos, and analysts warned on Friday that if the
shutdown lasts more than a month, it would cause a sharp
slowdown in fourth-quarter economic growth.
Obama wants the debt ceiling raised for longer than the six
weeks first proposed by Republicans, and Republicans want a
commitment to broader deficit-reduction talks from the White
"The two of them agreed that all sides need to keep
talking," White House spokesman Jay Carney told reporters after
the call between Boehner and Obama. "It at least looks like
there is a possibility of making some progress here."
House Republicans will meet at the Capitol on Saturday
morning to discuss their options after sending the White House a
proposal that included the short-term increase in the debt limit
that would clear the way for reopening the government.
The House Republican proposal called for cuts in programs
like the Medicare health plan for seniors to replace two years
of the automatic spending cuts known as "sequestration" agreed
to last year by Congress, senior aides said.
"The good thing is the negotiations are ongoing. That is
much more progress than has been the case lately," House
Majority Leader Eric Cantor of Virginia said.
But Carney said the short-term increase proposed by
Republicans would not provide enough certainty for the economy
and would put the country back on the verge of default during
the end-of-year holiday season.
"A debt ceiling increase at only six weeks tied to budget
negotiations would put us right back where we are today in just
six weeks, on the verge of Thanksgiving and the obviously
important shopping season leading up to the holidays," Carney
At a White House meeting with Senate Republicans on Friday,
Obama expressed concerns the proposed debt-limit extension was
too short and also talked about the need for new revenues as
part of any long-term deficit reduction plan, Republican Senator
Orrin Hatch of Utah said.
Large portions of the U.S. government shut Oct. 1 after
Obama and Democratic lawmakers rejected House Republicans'
demands for delays to Obama's healthcare reforms in exchange for
temporary government funding. Thousands of government workers
have been furloughed and parks and attractions shuttered.
Deals were struck on Friday to reopen three of the most
famous landmarks, using state money and other funds. The Grand
Canyon, Mount Rushmore and the Statue of Liberty will soon be
open for visitors, as well as some parks in Colorado and Utah.
'A DIFFICULT EXPERIENCE'
Hatch said he left the meeting feeling the fiscal fight
would still be a "difficult experience."
But Senator Bob Corker, a Republican from Tennessee, said
senators "had to leave there knowing that probably in the very
near future we will have these issues behind us."
The new sense of optimism sent U.S. stocks higher on Friday,
extending gains from a major rally in the previous session.
. But U.S. Treasury bills maturing in late
November and throughout December spiked as banks and major money
market funds shy away from holding debt with any risk of delayed
interest or principal payments.
"If the shutdown lasts through the end of October, the
economic damage would be significant, reducing real GDP as much
as 1.5 percentage points in the fourth quarter," said Mark
Zandi, chief economist at Moody's Analytics in West Chester,
An unlikely coalition of the heads of the U.S. Chamber of
Commerce, AFL-CIO labor federation and United Way Worldwide
joined together on Friday to warn about the dangers of a
prolonged economic impasse.
"While we may disagree on priorities for federal policies
and we even have conflicting views about many issues, we are in
complete agreement that the current shutdown is harmful and the
risk of default is potentially catastrophic for our fragile
economy," they wrote in a letter to Obama and members of
Obama spoke by phone to a group of about 150 leaders of
major businesses on Friday afternoon, the White House said.
"The president reiterated that his first order of business
is to urge Congress to reopen the government and remove the
threat of default, and then he is willing to engage with
Congress on a long-term budget," the White House said.
Time was running short, with the shutdown in its 11th day
and less than a week to go before the Treasury Department
exhausts its ability to borrow money to pay the government's
Any deal that is struck by leaders could face a revolt from
rank-and-file conservatives in both the House and Senate.
Texas Senator Ted Cruz, a Tea Party favorite who has been a
leader of conservatives demanding delays or defunding of Obama's
healthcare law before they will approve a budget deal, took a
hard line at a conference of conservative activists.
In a speech frequently interrupted by hecklers but warmly
embraced by the smaller-government Tea Party faithful, he said
the country must "stop that train wreck, that disaster, that
nightmare that is Obamacare."
Senate Democratic leader Harry Reid is scheduled to hold a
vote on Saturday on a measure giving a one-year debt ceiling
increase without conditions. It is expected to be opposed by
Senate Republicans. The chamber may then move quickly on a
shorter time frame, even if it is not Democrats' first choice.
Senate Republicans were discussing a series of different
ideas, including a quick reopening of the government coupled
with a debt limit increase and the repeal of an unpopular
medical device tax that would raise revenues to pay for the
Reid on Friday publicly criticized Republican calls for a
short extension of the borrowing authority.
"We do not believe a six-week delay of a catastrophic
default is enough to get the economy the confidence it needs,"
Reid said on the Senate floor.
A Reuters/Ipsos poll on Friday showed more Americans blamed
Republicans for the shutdown, which also appears to be damaging
the party's reputation on issues such as healthcare and the
Nearly one-third of Americans - 32 percent - say Republicans
are responsible for the shutdown, up from 26 percent a week ago.
About 4 percent said Democrats were mostly at fault for the
shutdown, down from 5 percent. Sixteen percent blamed Obama, up
from 14 percent.