US debt ceiling: Congress races to draft fiscal plan
The US Senate is finalising a cross-party bill to raise the debt limit and reopen the US government, just a day before a critical deadline.
US media report the Republican-led House of Representatives could vote on the bill first, in a procedural move to expedite its passage.
Amid the congressional disarray, a top ratings agency warned of a possible downgrade in US creditworthiness.
The US must raise its $16.7tn (£10.5tn) debt limit by Thursday or risk default.
"I understand [Senate leaders] have come to an agreement," Republican Senator Kelly Ayotte told the Associated Press news agency on Wednesday.
Politicians, bankers and economists have warned of global economic consequences unless an agreement can be reached.
The US Treasury has been using what it has called "extraordinary measures" to pay its bills since the nation reached its current debt limit in May.
Those methods will be exhausted by 17 October, US Treasury Secretary Jack Lew has said, leaving the US unable to meet all of its debt and other fiscal obligations, and potentially destabilising international markets.
"People are so tired of this," US President Barack Obama, who has refused to yield to Republican efforts to extract policy concessions during the fight, said on Tuesday in an interview with Los Angeles TV station KMEX.
Senate Democratic leader Harry Reid and his Republican counterpart, Mitch McConnell, were expected to brief their colleagues on Wednesday.
Their plan reportedly would extend the federal borrowing limit until 7 February and fund the government to mid-January, and would include relatively minor changes to Mr Obama's signature healthcare law.
The Senate is due to reconvene at noon (16:00 GMT), and if the leaders do strike a deal, the first votes could come later on Wednesday.
But even if a compromise can overcome Senate procedural hurdles, it remains unclear whether it can muster enough votes in the Republican-led House to pass before the 17 October deadline.
On Wednesday, chairman of Standard and Poor's Sovereign Debt Committee John Chambers told CBS News that a US debt default would be "much worse than Lehman Brothers", referring to the investment firm whose collapse in 2008 helped set off the global financial crisis.
"If it does happen, it's a pure act of idiocy," warned billionaire investor Warren Buffett on CNBC.
As the Senate deal took shape on Monday and Tuesday, the Republican leadership in the House of Representatives floated last-ditch proposals aimed at asserting their voice in the negotiations.
But the House leadership team, fronted by Speaker John Boehner, saw its proposals rejected by the Republican rank-and-file as being insufficiently conservative in nature.
The Senate plan, should it pass that chamber on Wednesday, could then pass the House, with most of the Democratic caucus joined by a smaller number of more moderate Republicans, analysts say.
Amid the legislative turmoil, the Fitch credit agency warned it could downgrade the US government's AAA rating, while the Dow Jones index ended the day down 133 points.
On Tuesday afternoon, President Obama told a local ABC broadcaster he expected the debt ceiling impasse would be resolved.
But he added: "I think the House Republicans still believe they can get concessions for doing their job."
Hardline conservatives triggered the budget warfare 16 days ago, forcing the first government shutdown in 17 years by demanding that Mr Obama gut his signature healthcare overhaul plan.
By Tuesday afternoon, the House leadership was left offering a relatively modest proposal to deny discounts for lawmakers and their staff members on health insurance policies.
In the Senate plan under negotiation, Republicans may only emerge with a sop in the form of language tightening income verification for anyone seeking subsidies on medical coverage.
The Senate plan would also set up a conference committee between it and the House that would be tasked with drawing up a longer-term budget deal.
Although both parties have fared badly in opinion polls during the fiscal standoff, Republicans have taken the brunt of the blame from voters.
And with concerns about potential damage to the party's prospects in next year's midterm elections, the political recriminations have already begun.
Moderate Republican congressman Peter King told the Huffington Post: "After shutting down the government for two-and-a-half weeks, laying off 800,000 people, all the damage we caused, all we would end up doing was taking away health insurance from congressional employees. That's it? That's what you go to war for?"
Senator John McCain, who was the Republican 2008 presidential nominee, was quoted by the New York Times as saying: "Republicans have to understand we have lost this battle, as I predicted weeks ago, that we would not be able to win because we were demanding something that was not achievable."
The White House has refused to negotiate over its healthcare law, pointing out that it passed in 2010, was subsequently validated by the Supreme Court, and was a central issue in the 2012 presidential election, which Mr Obama won comfortably.