Talks on ending the government shutdown and preventing default have once again deadlocked, but this time it is Democrats who are demanding changes to current law as a condition for ending the impasse.

With the two sides now negotiating to extend government funding until at least January 31, Democrats are now insisting on spending increases - they want to end most of the cuts put in place as part of the so-called sequester. Democrats are still willing to accept a short-term deal to reopen the government at sequester spending levels (the Senate, of course, passed a 6-week extension on those terms), but now that talks are centered on funding the government into 2014, they are insisting on undoing some of sequester cuts. To Republicans, this is a non-starter, unless the sequester spending cuts are replaced with cuts to entitlement programs - and that is a non-starter for Democrats.

The impasse makes it more likely there will be no agreement when markets reopen Monday morning. If an agreement is not soon reached, it may be impossible to pass anything before October 17, the day the Treasury Department says the government risks default if Congress does not extend the government's ability to borrow money.

Talks in the Senate began on an optimistic note Saturday when Democratic Leader Harry Reid and Republican Leader Mitch McConnell - two men who have been barely on speaking terms over the past several weeks - took the lead on crafting a deal that would reopen the government and extend the nation's ability to borrow money until at least January 31. Republican leaders, beaten and battered in the polls and eager to end an impasse of their own creation, had dropped almost all their demands. Major changes to Obamacare, the Republican demand that started the mess in the first place, are now off the table.

Going into talks with Reid, McConnell was already preparing to deal with a backlash from tea party Republicans. In an interview with the Lexington Herald-Leader newspaper, McConnell said it was time for a "come together" moment with Democrats to prevent default and get the government reopened.

"As much as I would rather have a Republican president and would rather be the majority leader of the Senate, I am willing to work with the government we have - not the one I wish we had," McConnell told the newspaper.

But while McConnell is prepared to give up on the Republican demands that started the crisis, he does not appear ready to agree to spending increases as well.

Meanwhile, Republicans in the House are watching all of this warily. Speaker of the House John Boehner's last offer, of a six-week extension of government funding and borrowing authority in exchange for budget talks, was rejected by the White House on Friday. Anything the Senate ultimately passes, will likely be opposed by the majority of House Republicans. Boehner would need to make an 11 th hour decision on whether to bring a Senate bill opposed by his members up for a vote or to attempt to change it once again.