10/10/2013 12:28 EDT | Updated 01/23/2014 06:58 EST

Republicans weigh short-term debt-limit bill as U.S. default looms

WASHINGTON - House Republican leaders are considering a short-term increase in the debt limit as a possible way out of the gridlock that threatens the nation with an unprecedented default in as little as a week, officials said Wednesday night.

At the same time, there is far less urgency inside the leadership about ending a nine-day government shutdown which has caused inconvenience for many, but appears not to threaten the widespread economic damage a default might bring.

Officials declined to say what conditions, if any might be attached to a bill to raise the $16.7 trillion debt limit for an undetermined period, perhaps a few weeks or months. The Republican rank and file are expected to meet and discuss the issue on Thursday, before a delegation led by Speaker John Boehner goes to the White House to meet with President Barack Obama.

Obama has said he won't agree to sign a debt limit increase if conditions are attached. Republicans are demanding as yet-unspecified concessions to reduce deficits or make changes in the nation's three-year-old health care law.

The officials spoke on condition of anonymity, saying they were not authorized to disclose details of private deliberations.

The U.S. government has been partially shut since Oct. 1 because of Congress' failure to pass a normally routine temporary spending bill. Obama also wants Congress to extend the government's borrowing authority — another once-routine matter — warning that if it fails to do so by Oct. 17, the United States will not be able to pay its bills.

The Obama administration has said that unless Congress acts, it expects to have an estimated $30 billion in cash left by Oct. 17. That is pocket change for a government that can spend tens of billions more than that on busy days and $3.6 trillion a year.

Hitting that date without congressional action would risk an unprecedented federal default that would wound the economy and deal lasting harm to the government's ability to borrow money, many economists warn.

In the Senate, Democrats have proposed a no-strings-attached $1 trillion increase in borrowing authority that is designed to prevent a recurrence of the current confrontation before the 2014 elections. A test vote is scheduled for the weekend, and Republicans have yet to indicate how vigorously they might oppose it.

In addition to House leadership conversations, a group of conservatives met privately during the day for what several officials described as a wide-ranging discussion on the debt limit and the threat — or lack of it — posed by default. No concensus was reached.

Meanwhile, the financial world is flashing unmistakable signs that it fears Washington's twin battles could hurt the economy.

On Wednesday, the International Monetary Fund's financial counsellor, Jose Vinals, said a failure by Congress to raise the federal debt ceiling and a subsequent U.S. default would cause "a worldwide shock."

Also, the National Retail Federation became the latest business group to urge lawmakers to quickly end their standoff. In a letter to congressional leaders, federation President Matthew Shay wrote Congress must "reverse the economic crisis it has created through the shutdown while it is still a short-term crisis and not the beginning of another recession."

Some Republicans have downplayed the significance of the deadline, saying that even then, the United States would be able to pay China and other holders of U.S. debt.

But Obama said they were badly misguided, warning that default would harm the economy, cause retirement accounts to shrivel and houses to lose value.

Republicans were demanding talks on deficit reduction and Obama's 2010 health care overhaul law as the price for boosting the government's borrowing authority and returning civil servants to work. Democrats want Congress to first end the shutdown and extend the debt limit.

"Speaker Boehner could end this government shutdown today, an hour from now" by letting the House of Representatives vote to do so, Democratic Senate Majority Leader Harry Reid said Wednesday.

Boehner's Republicans may end up taking the biggest hit in public opinion for Washington's gridlock, just as that party did when much of the government closed 17 years ago during President Bill Clinton's administration, according to the Associated Press-GfK survey, released Wednesday.

Overall, 62 per cent mainly blamed Republicans for the shutdown. About half said Obama or the Democrats in Congress bear much responsibility.

The AP-GfK Poll was conducted Oct. 3-7 and involved online interviews with 1,227 adults. The survey has a margin of sampling error of plus or minus 3.4 percentage points for all respondents.

Obama's approval rating fell to 37 per cent. Democrat Harry Reid, the Senate majority leader and Boehner, both had a favourability rating of just 18 per cent.