US Senate ‘very close’ to agreeing deal to raise debt ceiling and end shutdown

Senior Senate aides say deal is about to be announced

Congressional aides predict Senate Majority Leader Harry Reid and Republican leader Mitch McConnell could seal agreement (AP)

As the deadline to raise the US debt ceiling, prevent a default and end the Government shutdown approaches, senior aides in the Senate have suggested a deal is “very close”.

The Democrat, who asked not to be identified, was reported by Reuters to have said that negotiations were almost done, paving the way to announce a deal shortly.

He said there were “indications” that the Senate would then be in a position to pass it quickly – suggesting that the right-wing Republican activists President Barack Obama has described as “extremists” do not intend to block its path.

In the House of Representatives, meanwhile, Politico, National Review and others reported that Speaker John Boehner had agreed to allow the deal hashed out in the Senate to go to a vote.

With the House’s strong Democrat majority, that would effectively mean allowing its passage – raising the debt ceiling and reopening Government departments.

Following the developments, the markets responded strongly upon opening today. The Dow Jones rose sharply by around 1 per cent in the first hour of trading – roughly gaining what it lost over the course of uncertain developments yesterday.

With nearly everyone involved – indeed, with economic experts around the world calling on politicians to end the dispute, polls suggest the Republicans have lost most in terms of public opinion.

An editorial in the Wall Street Journal this morning read: “None of this is worth a partial government shutdown, much less the risk of a debt default, and both sides are looking like losers. Let’s get it over with.”

The chairman of Standard and Poor's Sovereign Debt Committee, John Chambers, told CBS News that a US debt default would be “much worse than Lehman Brothers”, referring to the 2008 banking collapse which instigated the global financial crisis.

“If it does happen, it's a pure act of idiocy,” warned billionaire investor Warren Buffett on CNBC.

Late into Tuesday night a bitterly fractured US Congress was still struggling to find an exit from the fiscal crisis gripping Washington, and top credit agency Fitch said it was considering downgrading America’s triple A credit rating, a blow that would be felt worldwide.

It had appeared that plans by House speaker John Boehner to put a package to a vote by the full House that would seek to fund the federal government only until mid-December and raise America’s debt ceiling until mid-February had come apart at the last minute because of a mutiny by the right wing of his own caucus.

All day Mr Boehner had been fumbling for a formula that would amend Obamacare sufficiently to placate his right flank while not scaring away moderates in the party. At the same time, he was under pressure from Democrats to take the opposite tack and table a so-called ‘clean bill’ with no such conditions.

The mood in Washington was becoming increasingly fevered with all sides watching the clock tick down on the Thursday deadline when the Treasury says it will run out of borrowing authority to access all the cash it needs to pay the bills before it. Even if the Treasury will have reserves on hand to keep writing some cheques come Thursday, reserves will quickly dwindle and could within days lead to the US defaulting on its debt.