WASHINGTON - The U.S. House votes Thursday on a plan to avert an American default, but conservatives in the Republican-dominated lower chamber, Senate Democrats and President Barack Obama were all lined up against the measure.
Fears that the deadlock won't be broken pushed global stock markets down yet another day as investors worried that a dysfunctional Congress might remain gridlocked past the Tuesday deadline to raise the debt limit.
Without legislation in place by then, the Obama administration says the Treasury will not be able to pay all the nation's bills, possibly triggering a default that could prove catastrophic for an economy still recovering from the worst recession since the 1930s Great Depression. That would have major global consequences for the world's increasingly interconnected economies.
European markets were lower Thursday and Japan's Nikkei average was down almost 1.5 percent. U.S. stocks were headed to the worst week in nearly a year.
Deciding whether to support Speaker John Boehner's plan to raise the government's cap on borrowing, known as the debt ceiling, in exchange for trillions of dollars in federal spending cuts has vexed newly empowered House Republicans more than any other question in the seven months since they assumed control of the lower chamber and promised to upend the old order in Washington.
Some in the conservative tea party movement that helped propel the Republican gains in the 2010 elections concluded that Boehner already had betrayed them by negotiating with Mr. Obama on possibly increasing government revenues meaning taxes as part of a debt deal. But others said he deserved more time to put things right.
Divisions inside the Republican caucus could tarnish the party's deficit-slashing brand and chances for victory in the 2012 elections, when Mr. Obama also faces re-election.
After weeks of wrangling, however, Boehner appeared to have made some progress with conservatives who were angry that the bill didn't cut spending enough.
On Wednesday, Boehner held not one, but two meetings with Republicans telling the Tea Party members in no uncertain terms they needed to get on board, reports CBS News correspondent Nancy Cordes.
"We're getting there," he said, ahead of Thursday's scheduled vote. The bill had been hastily rewritten to force deeper spending cuts.
But some House conservatives still can't swallow the Boehner legislation.
"We're so obsessed ... with Aug. 2. I think what's important is that we get this right and neither plan right now does that, though I understand the speaker's plan is a step in the right direction," Rep Joe Walsh, R-Ill., told "Early Show" co-anchor Erica Hill Thursday, also referencing Senate Democractic Leader Harry Reid's proposal.
Walsh dismissed the notion that the U.S. was heading for default, saying there would be "plenty of government revenues" next month to service the national debt.
Even if that were true, it doesn't take into account huge federal obligations for American pensioners who rely on Social Security payments each month, benefits to military veterans or businesses large and small that do work for the government.
The White House disparaged the Republican bill, and Reid in the Democratic-controlled upper chamber was even more emphatic. He called it a "big wet kiss for the right wing."
The White House has threatened a veto, saying the bill does not meet Mr. Obama's demand for an increase in the debt limit large enough to prevent a rerun of the current crisis next year, in the heat of the 2012 election campaign.
Mr. Obama supports an alternative drafted by Reid that also cuts spending yet provides enough additional borrowing authority to tide the government over through 2012. The Senate measure does not include an increase in tax revenue, which had been a key Obama requirement until now.
While Boehner holds out hope that the Senate will pass his measure, a more likely outcome is a last-ditch effort to find a compromise.
In fact, Boehner's plan has enough in common with Reid's including the establishment of a special congressional panel to recommend additional spending cuts this fall that Reid hinted a compromise could be easy to pull together quickly.
"Magic things can happen here in Congress in a very short period of time under the right circumstances," Reid told reporters.