Leaders' talks fail to bring US back from brink of default

Former Alaska Governor Sarah Palin was among Tea Party activists in Washington yesterday. Photo / AP

The United States moved closer to a default that could seriously harm the economy as a partial government shutdown entered its third week.

Senate Democratic and Republican leaders remained at odds over spending in their last-ditch negotiations to end the crisis.

Democratic Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell spoke by phone yesterday but failed to agree on a deal to raise the nation's borrowing authority above the US$16.7 trillion ($20 trillion) debt limit. Separately, they also could not agree on a plan to reopen a government still closed on its 14th day.

Congress is racing the clock, with Treasury Secretary Jack Lew warning that the US will quickly exhaust its ability to pay the bills on Friday (Saturday, NZT).

The shutdown has furloughed 350,000 federal workers, impeded various government services, put continued operations of the federal courts in doubt and stopped the federal tax agency from processing tax refunds. Several parks and monuments remain closed, drawing a protest at the National World War II Memorial that included conservative Tea Party-backed legislators who had unsuccessfully demanded defunding of President Barack Obama's three-year-old health care law in exchange for keeping the Government open.

The crowd of Tea Party hardliners and veterans demonstrators converged on the memorial on the National Mall, pushing through barriers.

Republican Senators Mike Lee and Ted Cruz, and former Alaska Governor Sarah Palin, were part of the protest even though Cruz and Lee are among the Tea Party legislators who refused to keep the Government operating unless Obama agreed to their demands on healthcare.

As the crowd entered the memorial plaza, they chanted "Tear down these walls" and "You work for us". They sang God bless America and other songs.

"Our vets have proven that they have not been timid, so we will not be timid in calling out any who would use our military, our vets, as pawns in a political game," Palin told the crowd.

The memorial has become a political symbol in the bitter fight between Democrats and Republicans over who is at fault since the shutdown began on October 1.

One speaker described Obama as a Muslim and urged the crowd to initiate a peaceful uprising. "I call upon all of you to wage a second American nonviolent revolution, to use civil disobedience, and to demand that this president leave town, to get up, to put the Koran down, to get up off his knees, and to figuratively come out with his hands up," said Larry Klayman of Freedom Watch, a conservative political advocacy group.

- AP