No sign of break in US debt stalemate

The United States lurched Wednesday toward a potentially ruinous default or painful downgrade of its debt rating, with polarized politicians waging a see-saw battle with a deadline six days away. Worried global markets feared the stalemate's possibly disastrous effects on the world economy, with US stocks dropping for the fourth straight trading session while investors seeking safe haven briefly sent gold to a new record. The Democratic-led Senate and Republican-held House of Representatives warred over rival plans that both tied spending cuts to an increase of the $14.3 trillion debt limit but seemed no nearer to bridging a yawning partisan gap. "If we don't clear this chasm, our nation's economy will go over the edge with us," said Democratic Senate Majority Leader Harry Reid, warning that "the world economy simply cannot bear this kind of uncertainty any longer." The US Treasury has warned the world's richest country will run out of cash to pay its bills come August 2, sending shockwaves through the fragile economy, though some analysts saw a days-long reprieve thanks to a rise in tax receipts. US leaders worried that even a breakthrough deal to lift the debt limit might not spare the United States from losing its sterling Triple-A debt rating, a downgrade that could raise interest rates across the already ailing US economy. US stocks and Treasury bond prices fell under the weight of the stalemate, with the Dow Jones Industrial Average off 0.9 percent near midday (1600 GMT) and the tech-heavy Nasdaq down 1.8 percent, despite fairly buoyant company earnings. Gold surged to $1,628.05, beating Monday's record, before dropping back slightly to $1,620. After steadily falling against the euro since July 18, the dollar regained about 1.4 cents to $1.4374. It also regained slightly against the Swiss franc, which with gold has been the favored safe-haven in recent weeks, rising to 0.8029 from 0.8012 late Tuesday. Republican House Speaker John Boehner raced to save his bill for raising the debt ceiling, aggressively courting and pressuring conservatives who seemed to be swinging behind the plan as a last-ditch solution to the logjam. "I've shifted from leaning no, to leaning yes," Republican Representative Blake Farenthold told reporters. "We can't let the perfect be the enemy of the doable." And Republican Representative Jim Jordan, who heads the conservative Republican Study Committee, backed off his prediction on Tuesday that Boehner's plan would fail to rally even enough Republicans to pass in the House. "I don't know where the votes are today. I just know that I'm against the bill," he told reporters, saying of his RSC members "there are some of them for, some will be against." Boehner rescheduled a vote set for Wednesday and was re-writing the bill after the non-partisan Congressional Budget Office (CBO) said its spending cuts were not as deep as he advertised, worrying conservatives. The key players in the debt drama have tentatively agreed to cut spending over 10 years by as much as the debt ceiling is to be raised in a show of will to get cash-strapped Washington's fiscal house in order. But Boehner's plan would force another debt-ceiling showdown during the 2012 presidential election, something Reid and President Barack Obama fiercely oppose, while tying future debt increases to more spending cuts. Reid's plan aims to put off the next debt standoff to after the election and does not include Obama's call for raising taxes in the rich and wealth corporations, a compromise in the face of lockstep Republican opposition. Amid dire warnings about the potential threat to the global economy from a possible US default, lawmakers on a key House panel were due to quiz officials from key ratings agencies Standard & Poor's and Moody's Investor's Service. Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally. If there is no deal, the United States, still recovering from the 2008 recession with unemployment hovering around 9.2 percent, could be faced with tough choices -- either a debt default or reneging on obligations like government benefits for the poorest, most vulnerable Americans. Asked about the potential for catastrophe, Farenthold told reporters: "Hopefully we'll have this done by Tuesday... let's quit foolin' around."