House plan called off to reopen government, avert default

Updated 8:50 p.m. ET

A House plan to reopen the government and extend the U.S. borrowing authority while making some modifications to the health care law will not come up for a vote, a GOP leadership aide told CBS News, after the Republican-led body struggled to muster adequate votes. Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., have subsequently resumed negotiations, and spokesmen for the two on Tuesday evening said they are "optimistic that an agreement is within reach."

The news comes just one day before the U.S. borrowing authority is set to On Oct. 17, U.S. will have exhausted its borrowing authority and the government is in its fifteenth day of a partial  government shutdown.

House Republican leaders announced Tuesday 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, but two provisions of the Affordable Care Act - the individual mandate and a requirement that employers provide contraception coverage - take effect on Jan. 1. By forcing budget negotiations to conclude before the end of the year, Republicans can still try to fight those two provisions.

The House plan would not have repealed a medical device tax for two years, which appeared to be a part of negotiations Monday morning, nor would it have adopted a Senate provision that would delay for one year a special tax of $63 on all health insurance plans to help spread out the costs of giving insurance to the most ill Americans for the first time. But it would have barred elected officials and staff in Washington, D.C. from receiving subsidies to buy health care on the exchanges, and it would bar the Treasury Department from using so-called "extraordinary measures" to extend to allow the government to manage its cash in such a way that it can keep paying bills for a period of time once the U.S. legally hits its cap on spending.

A Democratic aide told CBS News that extraordinary measures provision is a "poison pill" for Democrats. "They want to put on a prohibition on the treasury secretary and the president to use extraordinary means to stave off a default. No president or any secretary of the treasury has been constrained in that way. It is not a good thing," House Minority Leader Nancy Pelosi, D-Calif., told Bloomberg News.

After a meeting at the White House on Tuesday afternoon, Pelosi told reporters that the emerging contours of the House plan were unacceptable to Democrats.

"If it is as it has been described they will have to do that with 100 percent Republican votes," she warned. "The bill that the Republicans are putting on the floor today is a decision to default. Now once they get over that, then we'll see what they send to the floor."

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As the maneuvering continued Tuesday afternoon, the global rating agency Fitch said Tuesday that the United States' AAA credit rating is now under review for a downgrade.

"Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default," the firm said in a statement.

The statement also said, however, that "even if the debt limit is not raised before or shortly after 17 October, we assume there is sufficient political will and capacity to ensure that Treasury securities will continue to be honoured in full and on time."

In response, a Treasury spokesperson said, "The announcement reflects the urgency with which Congress should act to remove the threat of default hanging over the economy."

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. Now that they haven't, a senior aide to McConnell predicted Tuesday to CBS News, the Reid-McConnell plan could become much more attractive to Senate conservatives.

Pressure is rising on Republicans as their poll numbers have grown worse with every day of the government shutdown. A 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 President Obama has handled the situation, and 61 percent for Senate Democrats.