WASHINGTON — With the federal government on the brink of a default, a House Republican effort to end the shutdown and extend the Treasury's borrowing authority collapsed Tuesday night as a major credit agency warned that the United States was on the verge of a costly ratings downgrade.
After the failure of the House Republican leadership to find enough support for its latest proposal to end the fiscal crisis, the Senate's Democratic and Republican leaders immediately restarted negotiations to find a bipartisan path forward. A spokesman for Senator Harry Reid of Nevada, the majority leader, said Mr. Reid was "optimistic that an agreement is within reach" with Senator Mitch McConnell of Kentucky, the Republican leader.
With so little time left, chances rose that a resolution would not be approved by Congress and sent to President Obama before Thursday, when the government is left with only its cash on hand to pay the nation's bills.
(Read more: Buffett: Debt limit is 'weapon of mass destruction')
"It's very, very serious," warned Senator John McCain, Republican of Arizona. "Republicans have to understand we have lost this battle, as I predicted weeks ago, that we would not be able to win because we were demanding something that was not achievable."
A day that was supposed to bring Washington to the edge of resolving the fiscal showdown instead seemed to bring chaos and retrenching. And a bitter fight that had begun over stripping money from the president's signature health care law had essentially descended in the House into one over whether lawmakers and their staff members would pay the full cost of their health insurance premiums, unlike most workers at American companies, and how to restrict the administration from using flexibility to extend the debt limit beyond a fixed deadline.