Senator: Deal to avoid default and open government

WASHINGTON (AP) — Senate leaders reached

last-minute agreement Wednesday to avert a threatened Treasury default

and reopen

the government after a partial, 16-day shutdown, according to a

Republican senator who also said congressional leaders would

push for passage as soon as possible.

The Dow Jones industrial average soared on the news that the threat of default was easing, rising roughly 200 points by late

morning.

"I understand they've come to an agreement but I'm going to let the leader announce that," Sen. Kelly Ayotte, R-N.H., said

as she walked into a meeting of Senate Republicans called to review details of the emerging deal struck by Senate Majority

Leader Harry Reid and GOP Leader Mitch McConnell.

Officials said the proposal called for the Treasury to have authority to continue borrowing through Feb. 7, and the government

would reopen through Jan. 15.

There was no official comment from the White House, although congressional officials said administration aides had been kept

fully informed of the negotiations.

While the emerging deal could well meet

resistance from conservatives in the Republican-controlled House, the

Democratic Leader,

Rep. Nancy Pelosi of California, has signaled she will support the

plan and her rank and file is expected to vote for it in

overwhelming numbers.

That raised the possibility that more Democrats than Republicans would back it, potentially causing additional problems for

House Speaker John Boehner as he struggles to manage his tea party-heavy majority.

Ayotte said she understood the legislation would first receive a vote in the House, an arrangement that would speed its way

through Congress to President Barack Obama's desk.

Speaker John Boehner and the House

Republican leadership met in a different part of the Capitol to plan

their next move. A

spokesman, Michael Steel, said afterward that no decision had been

made "about how or when a potential Senate agreement could

be voted on in the House."

The developments came one day before the

deadline Treasury Secretary Jack Lew had set for Congress to raise the

current $16.7

trillion debt limit. Without action by lawmakers, he said,

Treasury could not be certain it had the ability to pay bills as

they come due.

In addition to raising the debt limit, the proposal would give lawmakers a vote to disapprove the increase. Obama would have

the right to veto their opposition, ensuring he would prevail.

House and Senate negotiators would be

appointed to seek a deficit-reduction deal. At the last minute, Reid and

McConnell jettisoned

a plan to give federal agencies increased flexibility in coping

with the effects of across-the-board cuts. Officials said

that would be a topic for the negotiations expected to begin

shortly.

Despite initial Republican demands for the

defunding of the health care law known as Obamacare, the pending

agreement makes

only one modest change in the program. It requires individuals and

families seeking subsidies to purchase coverage to verify

their incomes before qualifying.

There were some dire warnings from the financial world a day after the Fitch credit rating agency said it was reviewing its

AAA rating on U.S. government debt for possible downgrade.

John Chambers, chairman of Standard &

Poor's Sovereign Debt Committee, told "CBS This Morning" on Wednesday

that a U.S. government

default on its debts would be "much worse than Lehman Brothers,"

the investment firm whose 2008 collapse led to the global

financial crisis.

Billionaire investor Warren Buffett told CNBC he doesn't think the federal government will fail to pay its bills, but "if

it does happen, it's a pure act of idiocy."

Rep. Steve King, R-Iowa, a tea party favorite, said he was not worried about the prospect of a U.S. default.

"We are going to service our debt," he told CNN. "But I am concerned about all the rhetoric around this ....I'm concerned

that it will scare the markets."

Aides to Reid and McConnell said the two men had resumed talks, including a Tuesday night conversation, and were hopeful about

striking an agreement that could pass both houses.

It was expected to mirror a deal the leaders had neared Monday. That agreement was described as extending the debt limit through

Feb. 7, immediately reopening the government fully and keeping agencies running until Jan. 15 — leaving lawmakers clashing

over the same disputes in the near future.

It also set a mid-December deadline for

bipartisan budget negotiators to report on efforts to reach compromise

on longer-term

issues like spending cuts. And it likely would require the Obama

administration to certify that it can verify the income of

people who qualify for federal subsidies for medical insurance

under the 2010 health care law.

But that emerging Senate pact was put on

hold Tuesday, an extraordinary day that highlighted how unruly

rank-and-file House

Republicans can be, even when the stakes are high. Facing solid

Democratic opposition, Boehner tried in vain to write legislation

that would satisfy GOP lawmakers, especially conservatives.

Boehner crafted two versions of the bill,

but neither made it to a House vote because both faced certain defeat.

Working against

him was word during the day from the influential group Heritage

Action for America that his legislation was not conservative

enough — a worrisome threat for many GOP lawmakers whose biggest

electoral fears are of primary challenges from the right.

The last of Boehner's two bills had the same dates as the emerging Senate plan on the debt limit and shutdown.

But it also blocked federal payments for the

president, members of Congress and other officials to help pay for

their health

care coverage. And it prevented the Obama administration from

shifting funds among different accounts — as past Treasury secretaries

have done — to let the government keep paying bills briefly after

the federal debt limit has been reached.

Boehner's inability to produce a bill that

could pass his own chamber likely means he will have to let the House

vote on a

Senate compromise, even if that means it would pass with strong

Democratic and weak GOP support. House Republican leaders

have tried to avoid that scenario for fear that it would threaten

their leadership, and some Republicans worried openly about

that.

"Of all the damage to be done politically

here, one of the greatest concerns I have is that somehow John Boehner

gets compromised,"

said Sen. Lindsey Graham, R-S.C., a former House member and a

Boehner supporter.

With the default clock ticking ever louder,

it was possible the House might vote first on a plan produced by Senate

leaders.

For procedural reasons, that could speed the measure's trip

through Congress by removing some parliamentary barriers Senate

opponents might erect.

The strains of the confrontation were showing among GOP lawmakers.

"It's time to reopen the government and

ensure we don't default on our debt," Rep. Jaime Herrera Beutler,

R-Wash., said in

a written statement. "I will not vote for poison pills that have

no chance of passing the Senate or being signed into law."