Shutdown: Senate Inches Closer To Fiscal Deal

Senate leaders are closing in on an agreement to reopen the government and avert an economy-rattling default on federal debt.

Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, have sounded an optimistic tone after negotiations. A deal could be sealed today - with just two days to go before the Treasury Department says it will run out of borrowing capacity.

"We hope that with good fortune ... perhaps tomorrow will be a bright day," Mr Reid said late on Monday.

According to leaked details, the emerging pact would reopen the government through January 15 and permit the Treasury to borrow normally until early to mid-February.

The deal would ease dual crises that have sapped confidence in the economy and spooked investors.

Harry Reid (L) and Mitch McConnel have expressed cautious optimism

However, the Republican-dominated House was preparing a separate proposal likely to win over conservatives who have signalled opposition toward the emerging Senate deal, seeing it as a defeat.

The Senate plan is a far cry from the assault on President Barack Obama's health care law that many Republicans originally demanded as a condition for keeping the government open and increasing the government's $16.7trn borrowing cap.

It includes only minor changes to Obamacare, as the health care legislation is known, and falls well short of the Republicans' goal of delaying or de-funding it.

The House proposal would repeal the new tax on medical devices in Obamacare, and include a requirement that Congress and top Obama Administration cabinet officials obtain health coverage under the program.

The White House immediately labelled the House proposal as a "partisan attempt to appease a small group of Tea Party Republicans".

Protesters stormed the World War Two Memorial last week

House Speaker John Boehner told reporters on Tuesday that members did not discuss details of the latest plan on Tuesday, saying only that members of the House "from both sides of the aisle" continue to work "to find a way forward".

With citizens growing weary of a shutdown that has now entered its third week and GOP numbers plunging, the day had begun amid cautious signs of optimism on Capitol Hill.

On Wall Street, futures were mixed, with investors somewhat optimistic over a potential deal.

The shutdown has already furloughed hundreds of thousands of federal workers and forced national parks and monuments to close down in high season.

Some tourist attractions such as the Grand Canyon and the Statue of Liberty have now reopened, as states agreed to fund their running. But many communities have lamented the economic damage they had to incur.

Economists see an even greater financial danger from an historical default.

Christine Lagarde, the International Monetary Fund's managing director, spoke fearfully about the disruption and uncertainty, warning of a "risk of tipping, yet again, into recession" after the fitful recovery from 2008.

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