Barack Obama, Republicans continue talks after White House meeting

Washington: Republicans offered a plan to President Barack Obama on Thursday that would postpone a possible U.S. default in a sign the two sides may be moving to end the standoff that has shuttered large parts of the government and thrown America's future creditworthiness into question.

No deal emerged from a 90-minute meeting at the White House, but the two sides said they would continue to talk. It was the first sign of a thaw in a political crisis that has weighed on financial markets and knocked hundreds of thousands of federal employees out of work.

"It was a very adult conversation," said Republican Representative Hal Rogers, who attended the meeting. "Both sides said they were there in good faith."

The Republican offer would extend the government's borrowing authority for several weeks, staving off a default that could come as soon as October 17. It would not necessarily reopen government operations that have been shuttered since October 1, but a Republican aide said that was part of the discussion as well.

Significantly, Republicans seemed to be steering clear of the restrictions on Obama's healthcare reforms and spending that prompted the crisis in the first place. The two sides instead are negotiating how far to extend the debt limit and how much funding they would provide the government when it opens, a Republican aide said.

Both sides were expected to continue talks into the night.

"The President looks forward to making continued progress with members on both sides of the aisle," the White House said in a statement.

Conflicting reports of the outcome of the meeting sent immediate ripples through financial markets. U.S. equity index futures tracking the S&P 500 index dropped after a report that Obama had rejected the Republican offer, but rose when details of the meeting trickled out. Major U.S. equity indexes closed 2 percent higher earlier on Thursday on hopes of a deal.

SHIFT BY REPUBLICANS

The proposal is a significant shift for Republicans, who had hoped to use the threat of a shutdown and a default to undermine Obama's healthcare law and win further spending cuts.

Those goals remain, but the Republican offer would at least push off the threat of default from October 17 until possibly the middle or end of November.

That would give Republicans more time to seek spending cuts, a repeal of a medical-device tax, or other measures they say are needed to keep the national debt at a manageable level.

The crisis began in late September when Republicans tied continued government funding to measures that would undercut the Affordable Care Act, Obama's signature legislative accomplishment. In recent days, Republican leaders have emphasized other goals, such as reining in the retirement and health benefit programs that pose a long-term threat to the country's fiscal health.

For the first time since the government shutdown began 10 days ago, senior lawmakers from both parties predicted they would be able to resolve their differences in a way that would allow both sides to claim victory.

"It's all going to work out," said Republican Representative John Mica of Florida.

Many hurdles remain. Obama has said he will not negotiate on anything until Republicans agree to reopen the government and remove the threat of immediate default.

Rank-and-file Republican conservatives who remain focused on defeating "Obamacare" also could reject the deal.

House Speaker John Boehner's grip over his troops has been tenuous this year and many of the chamber's most conservative lawmakers have defied him repeatedly on other crucial votes.

Boehner has taken pains to show his party's most rebellious members that he listens to their concerns. He took a different approach when he unveiled his proposal on Thursday.

"He put his best Coach Boehner voice and demeanor on and said, 'Guys, this is what we are going to do. The play has been called. I'm happy to answer questions,'" said Republican Representative Tom Cole of Oklahoma.

The Obama administration says it will be unable to pay all of its bills if Congress does not raise the $16.7 trillion debt ceiling by October 17. Treasury Secretary Jack Lew said he would be unable to prioritize some payments over others among the 30 million transactions his department handles each week.

"It would be chaos," Lew told the Senate Finance Committee.

Democrats have called for a debt-ceiling hike that would extend government borrowing authority for more than a year, rather than the weeks-long time frame Republicans have proposed. Still, they did not entirely dismiss the plan.

"Let's see what they have offered," House Democratic Leader Nancy Pelosi said.

House leaders canceled a recess planned for next week and said they would remain in Washington to keep working on the problem.

Opinion polls indicate that Republicans appear to be getting more of the blame for the standoff. An NBC/Wall Street Journal poll released on Thursday found approval of the Republican Party at 24 percent, a record low. Democrats won the approval of 39 percent of the U.S. public.

Business groups that have close ties to the Republican Party have pressed for an end to the brinkmanship and some are laying plans to mount primary challenges next year to lawmakers who refuse to raise the debt ceiling.

Hundreds of thousands of federal employees have been thrown out of work by the shutdown and individual businesses, from arms makers to motels, have begun to lay off workers as well.

The Labor Department said on Thursday that 15,000 private-sector workers have filed for unemployment benefits due to the shutdown. 

Death benefits for soldiers to continue

Veterans Affairs Secretary Eric Shinseki, right, testifies at a hearing of the House Veterans' Affairs Committee regarding the effects of the government shutdown on military veterans benefits and services on Capitol Hill in Washington. 

Washington: Pentagon officials said on Wednesday that they would contract with a charity group, the Fisher House Foundation, to restore death benefits to families of service members killed in action, including a $100,000 payment, that have been stopped by the government shutdown. The officials said the Pentagon would reimburse the group after the shutdown ended.

But just before the Pentagon's announcement, the House voted unanimously to restore the benefits, a swift action reflecting the public outrage about this particular effect of the shutdown. On Wednesday, the remains of four soldiers killed over the weekend in Afghanistan were returned to families who had been initially told that the government could not pay for their death benefits or their funerals.

"How dare we not provide these grieving families with the necessary support in their time of need?" Rep. Sanford D. Bishop, D-Ga., asked on the House floor.

Although Pentagon officials insisted on Tuesday that they could not do anything about restoring death benefits without congressional approval, their agreement with Fisher House on Wednesday suggested that the officials had changed their minds.

The Senate will not take up the House bill now that the Defense Department has acted.

In addition to a $100,000 payment to each family, the death benefits include payment for burial and a 12-month basic allowance for housing, usually given in a lump sum to survivors commensurate with the rank of the service member.

The Pentagon "has determined that we can enter into a contract with the Fisher House Foundation to provide these benefits," Defense Secretary Chuck Hagel said Wednesday in a statement. He travelled to Dover Air Force Base, Del., for the return of the remains of the soldiers recently killed in Afghanistan and to meet with their families.

Death benefits had been initially withheld from, among others, the family of Lance Cpl. Jeremiah Collins Jr., 19, of the Marines, who died in Helmand province in Afghanistan on Saturday.

Fisher House provides military families with housing near hospitals, so they can be near sick or injured service members during a stay. Although the Pentagon could not solicit the group directly for what is essentially a loan, Sen. Joe Manchin III, D-W.Va., brokered the arrangement.

Also on Wednesday, Eric K. Shinseki, the secretary of veterans affairs, told a House committee that $6 billion in disability compensation, pension and education payments to hundreds of thousands of veterans would be halted if the shutdown continued into late October. On Tuesday, thousands of workers with the veterans agency were put on furlough.

"Let me just say unequivocally that all the effects are negative," Shinseki said of a protracted shutdown. Pointing out that some veterans who work for the VA would lose both their income and benefits should the shutdown continue, he said, "I have the responsibility of keeping them from becoming homeless."

Although the Committee on Veterans Affairs tends to be less partisan than others, the tenor of the continuing fight between Congress and the White House bled into the hearing.

Rep. Jeff Miller, R-Fla., chairman of the committee, said he had been frustrated in efforts to get information about the effect of the shutdown, including whether veterans would be able to continue getting counseling for post-traumatic stress disorder. (They will.)

After commenting that the House had passed a bill to fund veterans' programs that the Senate had yet to take up, Rep. Tim Huelskamp, R-Kan., asked Shinseki, "Do you think Harry Reid doesn't like the VA or our veterans?" Reid is the Senate majority leader.

Shinseki, looking baffled, replied: "I think he highly values veterans. As to why Congress is unable to do its business, I will leave to the members to discuss."

Senate Democrats remain opposed to the House's piecemeal bills to reopen selective parts of the government.

"Ever since the government shut down nine days ago, the House has tried to act like the government isn't shut down," said Sen. Jon Tester, D-Mont.

On day one, parks close, workers stay home and panda cam goes dark

Washington: If there was a symbol on Tuesday of America's pent-up frustration with a gridlocked political system, it was this: Scores of elderly World War II and Vietnam veterans pushing past barricades to honour their fallen comrades at a memorial closed by a government shutdown.

The veterans arrived in Washington from Mississippi and Iowa, having spent thousands of dollars to charter "honor flights" to the capital. But like many others across the country, their plans collided with the reality of a Congress frozen by ideological disputes and unable to agree on how to keep the government open.

Lawmakers helped the veterans get past the barriers, but others around the country were not so lucky as tourists were blocked from their destinations and more than 800,000 federal employees were told to stay home.

Cleveland Faggard, 89, of Moss Point, Miss., who had been an aviation machinist for the Navy, had helped push past a black metal blockade after about a dozen Republican members of Congress arrived, responding to emailed pleas from the veterans. "I was just praying to the Lord," Faggard said. "He took care of it."

Around the country, barricades and padlocks closed off access to federal facilities as the vast machinery of the federal government began systematically shutting down operations for the first time in nearly two decades.

Americans seeking a variety of services at federal buildings found the doors shuttered, with no indication of when they might reopen. Federal employees braced for an uncertain financial future in the days ahead as their employers turned out the lights. Tourists found their vacation plans dashed at the entrances to hundreds of national parks and monuments.

When Sheila Caraway, 23, arrived at the Internal Revenue Service office in downtown Los Angeles, she was turned away by a security officer who explained that parts of the government had been shut down. She left the IRS without the tax refund that she had hoped would help pay for her cable TV bill.

"This is crazy. I don't like it. It's been over a year and I haven't gotten my refund," Caraway said, explaining that she had not followed the recent political struggles in Washington. "I think everyone is crazy right now. I want to go on vacation, get out of here."

Among the most noticeable impacts of the first shutdown of the Internet era: Many complex government websites were suddenly replaced by one-page notices like the one at Census.gov, which declared that "due to the lapse in government funding, census.gov sites, services, and all online survey collection requests will be unavailable until further notice."

Government Twitter accounts also went dark.

It was late Monday night when weary lawmakers finally gave up hope of passing a budget. On Tuesday morning, the executive branch started temporarily mothballing facilities and suspending the many services the government provides.

The reality of the shutdown became clear just hours later. Children's playgrounds in small pocket parks around Capitol Hill were closed. The military service academies suspended all intercollegiate sports competitions. The National Zoo's online "Panda Cam" stopped showing images of Mei Xian's latest cub. Officials stopped giving tours of Alcatraz prison in San Francisco Bay.

At the Statue of Liberty in New York, tourists from Norway and Beijing were prevented from getting close to the monument of freedom.

Haiyan Wang's 9-year-old nephew, Tony, had been "wanting to go inside the Statue of Liberty for a long time," Wang said Tuesday morning at Liberty State Park in Jersey City. She said her visiting relatives did not really comprehend what had happened in Washington because "the Chinese government never closes down."

Mail delivery continued as usual, financed by fees rather than the federal budget. Amtrak trains continued to run and officials said meat inspectors, border control agents and Transportation Security Administration screeners will stay on the job.

After a general retreat Monday, global investors reacted calmly Tuesday in the hours after congressional negotiations collapsed, as investors focused on the Oct. 17 deadline for raising the debt ceiling. Stocks on Wall Street closed slightly higher, while European and Asian stocks were mixed. Bond and foreign exchange markets were quiet.

Those looking for financial data to assess the impact of a shutdown will have to do it without help from the Congressional Budget Office and the Census Bureau, both of which are closing. The Bureau of Labor Statistics, which is scheduled to issue its monthly jobs report Friday, is also closing and said the jobs report would likely be postponed.

The Consumer Product Safety Commission said it would stop recalls of products that do not present an imminent threat to consumer safety. The Food and Drug Administration, which inspects the majority of food Americans eat, suspended routine establishment inspections and monitoring of imported foods and drugs.

The Centers for Disease Control furloughed about 68 percent of its staff and said the shutdown would significantly reduce its capacity to respond to food-borne illnesses and disease outbreaks. Federal Communications Commission officials said the agency would send all but about 38 of its 1,716 employees home for the duration of the shutdown.

At the Justice Department, Attorney General Eric H. Holder Jr. pledged to give back a portion of his salary in solidarity with his employees. Meanwhile, a federal judge denied a shutdown-related request from the Department of Justice to delay the antitrust case merger trial of American Airlines and US Airways, citing the need for an expeditious trial.

Traveling Tuesday in Seoul, South Korea, Secretary of Defense Chuck Hagel called the shutdown "nonsensical" and "needless," and said it would lead to the immediate furlough of about 400,000 civilian employees. (Obama signed legislation late Monday ensuring that uniformed members of the military will get paid during the shutdown.)

"It does cast a very significant pall over America's credibility with our allies when this kind of thing happens," Hagel told reporters.

Officials informed lawmakers that about 72 percent of the intelligence community's civilian workforce were furloughed. Sen. Dianne Feinstein, D-Calif., denounced the shutdown as "the biggest gift that we could possibly give our enemies."

The crowds were lighter than normal early Tuesday at L'Enfant Plaza in Washington, where there are a number of federal agencies. Phillip Davenport, a management analyst at the Federal Aviation Administration, who was deemed an essential employee, said he was expecting a heavier workload.

During the last shutdown 17 years ago, Davenport was on active duty in the military, based in Alaska, he said. "Back then, I don't remember for sure, but we came to work regardless of whether we were paid or not," he said.

At about 8 a.m., the steps of the Lincoln Memorial were being taped off by National Park police, metal barricades were erected and tourists were being turned away. Across Washington - the site of the political paralysis - commercial establishments sought ways to try to minimize the impact of a shutdown that will hit harder here than anywhere else. Late Monday, several bars and restaurants in the area started advertising "shutdown specials" for those who wandered in.

At Z-Burger, a popular restaurant in the Washington area, owners pledged to make good on their promise for a free burger for every furloughed federal worker. In a Twitter post, it said: "AlmostHere IF #GovernmentShutdown #FREE #Burgers."

(Reporting was contributed by Dan Frosch from Denver)