Debt brinkmanship on, US markets suffer

It seems when the nation's troubled markets most need a compromise to avoid a massive federal default, legislatures are moving away from one.

If no bill is passed by Tuesday, it would be the U.S.'s first default and leave the Treasury without sufficient funds to pay the nation's bills.

U.S. stocks fell Friday as the lawmakers failed again to break their stalemate on raising the nation's debt ceiling. Data showed the U.S. economy slowed dramatically in the first half of the year, according to Dow Jones newswires.

House Speaker John Boehner frantically rewrote his stalled emergency debt-limit bill yet again Friday as Senate Democratic leader Harry Reid signaled he's ready to push ahead with his own, the AP said.

President Barack Obama refused to compromised on a short-term plan, declaring "we're almost out of time". "This is one burden we can lift ourselves. We can end it with a simple vote."  See GlobalPost Obama's warning: "We're almost out of time" on debt plan

On the Hill, Reid pressed forward with his legislation, setting up a showdown vote for Sunday.

Meanwhile, Speaker Boehner moved to revise his plan in hopes of winning over conservatives who argue that it doesn't cut enough.

He reportedly will put his bill to a vote later Friday — but only after changing it to require that Congress pass a constitutional amendment requiring a balanced budget before a second increase in the debt ceiling, in a play to garner conservative votes. See GlobalPost "God says, vote no on Boehner debt plan"

But the change moves the bill even further from possible compromise, the Dow Jones Newswires reported. Obama has pushed for a single increase in the debt ceiling, with enough to back federal borrowing through the end of 2011.

Democrats said they were willing to consider raising the limit in two stages as Republicans have insisted on, but only if the second increase was guaranteed to occur.

By trying to amend the Constitution as part of the bill, the chances of the ceiling being lifted a second time are significantly lowered. Both the House and Senate would have to approve the balanced budget requirement by a two-thirds threshold.

President Obama said the time for compromise is now, and that the two political parties aren't "miles apart" in negotiations.

The U.S. could lost its AAA credit rating, Obama said. "Not because we didn't have the capacity to pay our bills, we do, but because we didn't have a AAA political system to match our AAA credit rating."

Senate Majority Leader Harry Reid (D., Nev.) said action must be taken on the Senate debt legislation by the end of the Friday, saying it is "likely our last chance to save this nation from default." He added that he has asked Senate Minority Leader Mitch McConnell (R, Ky.) to sit down with him to craft a compromise that will get enough support from Democrats and moderate Republicans, while circumventing conservative Republicans, on a deal to cut spending and raise the nation's $14.3 trillion debt limit.

Reid said businesses can't borrow more money than overnight because "no one knows what the interest rate will be tomorrow," due to the vast uncertainty in the U.S. markets.