As a possible national default loomed closer, Senate Democrats planned to introduce a stand-alone measure to increase the government's borrowing cap, challenging Republicans to a showdown that could unnerve financial markets.
Economists say a first-ever US default could trigger a
financial crisis and recession that would echo 2008 - or worse. The 2008 financial crisis plunged the country into the worst recession since the Great Depression of the 1930s.
A spokesman said Senate Majority Leader Harry Reid could unveil the measure to raise the debt ceiling as early as Tuesday, setting the table for a test vote later in the week. The measure is expected to provide enough borrowing room to last beyond next year's election, which means it likely will permit $1 trillion or more in new borrowing above the current $16.7 trillion debt ceiling that the administration says will be hit on Oct. 17.
The development came as a partial shutdown of the government enters its second week with no end in sight.
The shutdown was sparked by House Republicans' insistence that a temporary funding bill contain concessions on President Barack Obama's signature health care law.
Stocks got a case of the jitters on Wall Street where the Dow Jones industrial average was down 0.5%.
Halfway around the world China stressed the importance for the international economy of raising the US debt limit.
"Safeguarding the debt is of vital importance to the economy of the US and the world," Vice Finance Minister Zhu Guangyao said, according to the official Xinhua News Agency. China holds $1.277 trillion in US Treasury bonds, second only to Japan.
However, the impasse over the shutdown shows no signs of breaking, as each side sticks to its position.
Democrats from Obama on down to the most junior lawmakers say the Republican-controlled House should vote immediately on ending the partial closure of the government. Obama said House Speaker John Boehner "doesn't apparently want to see the ... shutdown end at the moment, unless he's able to extract concessions that don't have anything to do with the budget."
Boehner, in rebuttal, called on Obama to agree to negotiations on changes in the health care law, popularly known as "Obamacare," and steps to curb deficits, the principal Republican demands for ending the shutdown that began with the Oct. 1 start of the new fiscal year, and eliminating the threat of default.
"Really, Mr. President. It's time to have that conversation before our economy is put further at risk," Boehner said on the House floor.
It's unclear if Reid's effort to raise the debt ceiling will work. Republicans are expected to oppose the measure if it doesn't contain budget cuts to make a dent in the federal deficit.
The question is whether Senate Republicans will use a legislative procedural maneuver known as a filibuster to block a final vote on Reid's measure.
Until recently, debt limit increases have not been the target of s Senate filibuster.
Many Republicans in the Senate have voted for so-called clean debt limit increases during Republican administrations, including Senate Minority Leader Mitch McConnell.
The White House has said repeatedly the president will not negotiate with Republicans until the government is fully reopened and the debt limit has been raised. But it hasn't said the debt limit measure has to be completely "clean" of add-ons.
White House aide Jason Furman told reporters that the White House could accept some add-ons if Boehner "needs to have some talking point for his caucus that's consistent with us not negotiating ... that's not adding a bunch of extraneous conditions."
Another White House official, Gene Sperling, said the administration could be open to an interim, short-term debt limit extension to prevent a catastrophic default.
Republicans were sticking with a strategy of trying to pin the blame for the shutdown on Obama for being unwilling to negotiate. The House also passed legislation Monday to reopen the Food and Drug Administration, the latest in a series of piecemeal funding bills to advance through the Republican-controlled chamber, only to be blocked in the House of Representatives.
It's been commonly assumed that Republicans would suffer politically from the shutdown and the early polling data seems to bear that out.
A survey released Monday by The Washington Post and ABC News said disapproval of Republican handling of the budget showdown was measured at 70%, up from 63 % a week earlier. Disapproval of Obama's role was statistically unchanged at 51%.
Meanwhile some 350,000 civilian Defense Department workers were summoned back to work on Monday as the result of legislation Congress passed and Obama signed after the shutdown began. Other agencies, like NASA and the Environmental Protection Agency, remain mostly shuttered.
That left an estimated 450,000 federal employees idle at agencies responsible for domestic programs, ranging from the Departments of Education to Energy, and including Labor, Health and Human Services, Interior, Transportation and more.
The current standoff is the latest in a string of clashes over the past three years between Obama and a House Republican majority that has steered to the right with the rise of the conservative, anti-tax tea party movement.
Most Democrats and many Republicans have assumed the Republicans will pay a heavier price for a shutdown than the Democrats, since that was the case during the last government shutdown in 1995-1996.
And a survey released by the Washington Post-ABC said disapproval of Republicans was measured at 70 %, up from 63 % a week earlier. Disapproval of Obama's role was statistically unchanged at 51%.
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