Washington (AFP) – President Barack Obama sat down for talks with more of his Republican foes Friday amid hopes for a breakthrough in a budget showdown threatening the U.S. recovery and the global economy.
Just six days before a crunch deadline for Congress to raise U.S. borrowing authority — or risk the ignominy of a historic default — Obama met Republican senators at the White House.
Talks were also expected between Obama’s top aides and House Republican leaders on a temporary truce which would hike the debt ceiling for six weeks, and on the president’s demand for an end to a partial government shutdown.
The intensifying contact reflected the proximity of the October 17 deadline, moves by both sides to find a face-saving exit strategy, and new polls showing the Republican image taking a battering in the showdown.
A senior Republican source said talks went into the night after Obama and Republican leaders made progress on Thursday evening — but there was no sign of a deal yet. A similar news blackout was in force at the White House.
Obama was meanwhile meeting at the White House with the entirety of the Republican minority in the Senate, seen as more likely to support re-opening the government, partially shuttered for 11 days.
But Senate Majority Leader Harry Reid signaled Friday that Democrats were driving a hard bargain, suggesting a debt ceiling hike for more than six weeks, to avoid a similar round of brinkmanship in the run-up to the Thanksgiving and Christmas holiday period — the peak spending period for many consumers.
“We do not believe a six week delay of a catastrophic default is enough to give the economy the confidence it needs to continue growing and recovering,” said Reid.
The Senate will on Saturday vote on a 15-month extension of the debt ceiling, to take the issue off the table until after the mid-term congressional elections next year.
While the measure is unlikely to become law because it needs House support, it could provide a template for an eventual solution in the event of a longer term fiscal deal between Obama and Republicans.
Hopes for a deal spurred a rally in Asian stocks overnight and Wall Street followed the trend into positive territory in early trade.
The Dow Jones Industrial Average was up 17 points to 15,143.60 after a 200 point gain on Thursday.
The White House says Obama would be open to the Republican proposal for a six week extension to the $16.7 trillion debt ceiling — though would prefer longer.
The sticking point appears to lie in the Republican Party’s request for Obama to open talks on a budget deal as a condition for reopening the government.
Obama says he will only discuss long-term budget issues once the government returns to work and hundreds of thousands of federal employees are back at their desks.
For the first time, it seemed that both sides were seeking an end to the crisis, which even led to the suspension of death benefits to families of soldiers killed on duty.
Late Thursday, Obama signed into law a bill reinstating the payments, marking the end of a deeply embarrassing development for the administration, feuding lawmakers and the Pentagon.
If the U.S. debt ceiling is not raised by October 17, the Treasury would run out of money and could begin defaulting on U.S. obligations for the first time in history, with likely dire consequences for the world economy.
New signs of Republican flexibility may have been spurred by devastating polling numbers showing their party brand badly hurt by the political showdown.
An NBC News/Wall Street Journal poll showed 53 percent of those asked blamed Republicans for the government shutdown and only 31 percent pinned the blame on Obama.
Some 70 percent of those polled blamed Republicans for putting their political agenda before what was good for the country, compared to 51 percent who said the same of Obama.
Top finance officials from China, Europe and Latin America have joined International Monetary Fund Managing Director Christine Lagarde and World Bank President Jim Yong Kim in warning of a potential catastrophe if Washington is forced to slash spending or default on its debt.
Gang Yi, deputy governor of China’s Central Bank warned that Washington should have the “wisdom” to overcome the gridlock as soon as possible.
“The market doesn’t like uncertainty and we watch that drama very closely,” he said, speaking in a CNN-hosted panel discussion on the sidelines of the IMF/World Bank annual meetings in Washington.
China is the largest foreign holder of U.S. government debt.