Budget rift pushes Washington to the brink

A dramatic day of political breakdowns thrust the United States dangerously close to a debt default deadline tomorrow and left the global economy exposed to unpredictable knock-on turmoil.
Just 32 hours before the US government begins to run short of money to pay its bills, there was no clear way out of a stalemate that has called the dollar's status as the world's reserve currency into question.
Major world powers looked on is dismay at the brinkmanship and political recrimination in Washington, fearing reverberations that could wreak havoc in their own sometimes weakened economies.
"We're far from a deal at this point," White House spokesman Jay Carney admitted.

If Congress does not raise the government's current USD 16.7 trillion debt ceiling by October 17, the Treasury will have too little money coming in via tax receipts to meet all of its obligations.
It would be forced to chose, for example, between honoring bond payments or shelling out Social Security checks to older citizens.

Overnight hopes for an agreement between Senate Republicans and Democrats on raising US borrowing authority, faded once conservative House Republicans seized back the initiative by framing their own plan.
The bill included new efforts to constrain President Barack Obama's health care reform law, prompting the White House and Senate Democratic leaders to reject the plan and complain Republicans were hunting for a "ransom."

It then emerged that House leaders lacked even the votes to pass that Republican initiative, with the support of conservative "Tea Party" Republicans in question.
Senate talks were meanwhile put on hold pending developments in the House -- effectively leaving efforts to end the crisis in limbo.
"It's all fallen apart," said Democratic Senator Dianne Feinstein.
"We are stunned by the reaction in the House."
As bitter rhetoric hit new heights, Senate Democratic leader Harry Reid furiously accused Republican House Speaker John Boehner of seeking to save his own political skin at the expense of his nation.
"Let's be clear: the House legislation will not pass the Senate," Reid said. "I am very disappointed with John Boehner, who would once again try to preserve his role at the expense of the country."

Like the nascent Senate proposal, the House Republican plan would fund government through January 15 while extending the debt ceiling to February 7.
But it included a bid to delay a medical device tax designed to pay for part of the Obamacare health reforms and would remove special protections for labor unions under the health care law.