Senate leaders scramble to avoid US default

With less than a day to go before the US hits its borrowing limit, a deal on ending the government shutdown proved elusive sending two top Senate leaders scrambling to find a way out.

Democratic Senate majority leader Harry Reid and Republican minority Mitch McConnell resumed their own talks Tuesday night to end the shutdown, now in its 16th day, after House Republican leaders found few takers for their own plan. Spokesmen of Reid and McConnell said they "are optimistic that an agreement is within reach," and Senate staffers were working through the night drafting a framework bill.

Both chambers of Congress have been working on bills ahead of the Oct 17 deadline when the Treasury says the US will run out of cash to pay its bills amid a warning from the Fitch credit rating agency that it may downgrade US government's AAA credit rating. Fitch placed the US credit rating on negative watch Tuesday, a step that would precede an actual downgrade saying "the political brinkmanship and reduced financing flexibility could increase the risk of a US default."

A Treasury Department spokesman said Fitch's announcement "reflects the urgency with which Congress should act to remove the threat of default hanging over the economy" by raising the $16.7 trillion US debt ceiling. As the talks floundered, President Barack Obama told CNN affiliate WABC-TV that negotiations have been made tougher because Republican House Speaker John Boehner "can't control his caucus."

"Him (Boehner) negotiating with me isn't necessarily good for the extreme faction in his caucus," Obama said. "It weakens him, so there have been repeated situations where we have agreements. Then he goes back and it turns out that he can't control his caucus." Earlier, House Republican leaders announced their intent to counter the Senate's proposal with a plan that would have lifted the debt ceiling through Feb 7 and funded the government through Dec 15. The Senate plan proposed to reopen the government through Jan 15.

The Senate plan that had been discussed Monday was put on hold Tuesday afternoon by McConnell, in order to see if House Republicans could pass a plan first. Meanwhile, new ABC News/Washington Post poll released Monday found that a new high of 74 percent of Americans disapprove of their handling of the budget crisis, up 11 points from a poll before the shutdown began. Only 53 percent of people surveyed disapprove of how Obama has handled the situation, and 61 percent for Senate Democrats.