McConnell and Reid plan to continue negotiations if the current House plan fails. Senators glum about debt-deal prospects

Grim-faced senators left their party lunches Tuesday fearful that Washington was poised to do the unthinkable: Blow past the Thursday deadline to avert an unprecedented default on the U.S. debt.

After House Republicans drew a stern rebuke from the White House for moving their own proposal, Senate leaders abruptly broke off their talks, leaving Washington with no clear path to avert a growing national crisis. Even if the House fails to pass a bill and a deal is eventually reached in the Senate, any one senator can object and delay a final resolution until after the Thursday deadline when the Treasury Department warns the country will start running out of cash to pay its bills.


Senate Democratic leaders have already warned that they will reject the proposal under consideration by House Speaker John Boehner. And there’s hardly any guarantee that the House will accept whatever deal is eventually reached between Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell.

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That left senators coming to grips with the possibility that the government shutdown — now in its third week — could be compounded with a debt default, provoking a fresh economic crisis that could rattle markets around the world.

“I don’t know in my 17 years here where I’ve seen a situation where a solution looked less likely,” said Mississippi Sen. Roger Wicker, a former House member, after lunching with fellow Republicans.

It’s still possible a quick resolution could be reached if lawmakers start feeling even more pressure for their failure to act — but that would take a lot of cooperation that’s been in short order so far.

The change in mood was stunning because senators in both parties largely thought the two party leaders were inches away from sealing an agreement to calm markets and restart the jobs of furloughed employees.

Indeed, Republicans came to the Capitol Tuesday morning expecting to be briefed about the emerging Reid-McConnell deal. Instead, many were greeted with news that Boehner planned to push his own plan that would seek more concessions from Obamacare, shorten the length of a stop-gap spending measure and limit the Treasury Department’s ability to go beyond the new debt limit deadline. GOP leaders canceled that briefing along with a press conference later in the day.

( Also on POLITICO: White House: House GOP bill demands a 'ransom')

Democrats believe Boehner “pulled the rug out” from underneath the Senate, as Sen. Martin Heinrich (D-N.M.) put it.

“We’re too close,” Heinrich said. “It’s reckless and irresponsible.”

Sen. Roy Blunt (R-Mo.), a member of GOP leadership, said it seemed “pretty real” that a deal by Thursday wouldn’t be able to clear Congress. Still, he suggested that the financial markets and the global economy would be calm if they “sense” a deal is in the works, even if it hasn’t cleared all the final legislative hurdles.

Sen. Susan Collins (R-Maine), who has been trying to hammer out a deal that ends the federal government shutdown and lifts the debt limit, said Tuesday that she was “obviously very worried” about the risk of default.

( PHOTOS: 25 great shutdown quotes)

“Even if it’s not the 17th or it may be the 18th, we know it’s coming,” Collins said. “We have an obligation to act to prevent a default.”

If the House fails to adopt the plan Tuesday evening, then the McConnell-Reid negotiations would resume. In many ways, Bohener’s failure would strengthen McConnell’s ability to sell the Senate proposal as the last, best possible deal for his party to end the fiscal crisis.

But if the House passes its bill, then McConnell is in a far trickier position. He could demand passage of a House GOP bill Reid and the White House strongly oppose — or he could try to cut a bipartisan deal that many House conservatives are already balking at.

It’s far from clear what McConnell will do. At a closed-door party lunch Tuesday, McConnell made little mention of his next steps, senators said, but indicated there was “no deal” finalized between him and Reid.

( PHOTOS: Mitch McConnell and Harry Reid’s friendship)

What could complicate things further is the possibility that any Senate deal could be delayed by a single senator. Every member of the Senate has the ability to object to efforts to quickly schedule a vote, which would force Reid to file a series of time-consuming procedural votes, effectively delaying a resolution until well past the Thursday deadline.

Sen. John Thune (R-S.D.), No. 3 in GOP leadership, urged Republican senators not to delay a quick vote if a deal is reached.

“I think given the consequences of what we’re talking about here, I would hope that if there’s some agreement, we can at least get it voted on,” Thune said.

But Sens. Mike Lee (R-Utah) and Ted Cruz (R-Texas), the two men who led the shutdown fight by demanding any funding bill be linked to anti-Obamacare provisions, were absent from the Tuesday party lunch.

Ahead of their scheduled press conference, both Senate Democratic and Republican leadership pressed the pause button on making any further public remarks about the state of play in the House.

“McConnell’s waiting on Boehner and Boehner is waiting on his caucus. If that sounds like a familiar script, we’ve seen this movie over and over again,” said Majority Whip Dick Durbin (D-Ill.). “McConnell will not work this as long as the Boehner question is open.”

Reid’s pessimism earlier Tuesday helped set the tone for a caucus lunch that Senate Democrats left noticeably downbeat particularly regarding the actions of Boehner, who Democrats believe is pushing the country to edge of default. They were still bullish that talks between Reid and McConnell good be resuscitated, but certainly not until the House proposal is resolved.

Sen. Chuck Schumer (D-N.Y.) said Democrats were “stunned” by the sudden reversal of fortunes for the Reid and McConnell talks that seemed so promising just a few hours ago.

“I’m hopeful that once Boehner’s reckless gambit has concluded, one way or the other, we’ll be able to get something done here in the Senate in a bipartisan way that hopefully the House can accept,” Schumer said.

But Republicans said it was Democrats who appeared be pushing the country to the edge for their no-compromise stance with the House GOP.

“It shows the president and Democrats are much more interested in winning than they are in resolving the situation,” said Sen. John McCain (R-Ariz.), who had been sharply critical of tea party conservatives’ tactics in the shutdown fight.

Some of the details were still being hammered out in the Senate plan, but the general contours are clear. A $986-billion stop-gap bill would extend government financing until Jan. 15, punting the fight over additional sequestration spending cuts until the next time the two parties have to negotiate a continuing resolution. Also, the plan would raise the $16.7 trillion debt ceiling until Feb. 7.

House Republicans have scrambled to change their proposal as they’ve struggled to secure the support ahead of a critical vote Tuesday evening. But their latest iteration would extend the debt ceiling until Feb. 7 while keeping the government open until Dec 15. It would include provisions canceling health-insurance subsidies for members of Congress, the president, vice president and the Cabinet. And it also would deny the Treasury Department’s ability to use “extraordinary measures” to go beyond the Feb. 7 deadline if the debt ceiling isn’t raised to avoid a default.

In the emerging Reid-McConnell plan, Treasury would still be given that “extraordinary measures” authority, which the White House is strongly pushing.

It’s not yet clear whether the final Senate deal would include any Obamacare-related provisions. McConnell is pushing for the inclusion of income verification requirements for recipients of Obamacare subsidies. But Reid is seeking a plan to delay Obamacare’s so-called reinsurance tax, nicknamed the “belly-button tax,” a proposal the GOP opposes because they see it as a handout to labor unions.

Democratic sources said Tuesday either both of those Obamacare provisions will be in a final deal, or neither will be.

Burgess Everett and Seung Min Kim contributed to this report.