Republicans offered a plan to President Barack Obama on Thursday that would postpone a possible US 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.
US 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 US equity indexes closed 2 per cent 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 emphasised other goals, such as reining in the retirement and health benefit programmes 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 demeanour 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 US$16.7 trillion (NZ$20t) debt ceiling by October 17. Treasury Secretary Jack Lew said he would be unable to prioritise 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 per cent, a record low. Democrats won the approval of 39 per cent of the US 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.