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Tea party revolt holds possible debt deals hostage

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WASHINGTON (Reuters) – A bill to cut the deficit faced a nail-bitingly close vote in Congress on Thursday as the top Republican lawmaker sought to quell an internal revolt and push his plan to avoid a ruinous default.

Approval of a plan by House of Representatives Speaker John Boehner would break the inertia in Washington over a debt crisis that has spooked markets and raised the prospect that the government of the world’s largest economy will run out of money to pay its bills in less than a week.

President Barack Obama has threatened to veto the bill and a majority of the Democratic-controlled Senate has vowed to vote against it.

But a successful vote in the House would give the bill legitimacy and make it a crucial element of the legislative chess game that is likely to play out up to August 2.

That’s when the Obama administration says it will run out of funds to pay the country’s bills unless a $14.3 trillion borrowing limit is increased.

A defeat of the bill could deepen the crisis, swinging the momentum toward a rival Democratic plan in the Senate but leaving no clear way to overcome entrenched opposition from fiscally conservative Tea Party Republicans in the House.

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As the brinkmanship over the ideologically charged dispute looks like it will go on through the weekend, investors and ordinary Americans are increasingly nervous that a previously unthinkable U.S. default could spark a new financial crisis.

Asian stocks slid more than 1 percent in thin volume on Thursday as investors nervously watched the clock tick down toward the debt ceiling deadline. European shares followed suit, sliding half a percent.

The Treasury says it will run out of spending money next Tuesday unless Congress agrees to raise the debt ceiling. Even if an 11th-hour compromise emerges, the United States could lose its top-notch credit status if ratings agencies are not convinced it has done enough to address its bulging debt burden.

The White House has warned of “catastrophic” consequences if a deal is not reached by August 2, rejecting the idea that Obama could invoke an obscure constitutional clause to raise the debt limit.

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Several House Democrats planned to hold a news conference on Thursday to urge Obama to take that option if necessary.

“The only option here is for Congress to do its job,” said senior White House adviser David Plouffe on the PBS television show “NewsHour.”

“We’ve run out of excuses and we’re running out of time.”

After weeks of bickering and setbacks, some common ground has emerged between rival Republican and Democrat plans to cut the deficit and raise the debt limit.

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A bill being pushed by top Senate Democrat Harry Reid and backed by the White House would cut $2.2 trillion from the deficit over 10 years without raising taxes.

Reid has said Boehner’s plan would be “dead on arrival” but that he could incorporate elements of it in a way that could win support from both parties.

TOO CLOSE TO CALL

Boehner’s two-step plan contains a crucial sticking point — it would only extend the Treasury’s borrowing authority by a few months, something Obama has said is unacceptable.

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Democrat Obama is facing a major test of his leadership over the debt crisis as he seeks to remove the debt-ceiling issue as a threat to the weak economy ahead of his bid for re-election in November 2012.

Boehner’s bill needs 217 votes and its chances appear too close to call even after he bluntly told fellow Republicans to “get your ass in line” behind his plan.

While some conservatives appeared to be reluctantly backing the bill, Tea Party groups are urging Republicans to reject any compromise, including Boehner’s plan.

Investors have raised their holdings of safe-haven assets such as gold but have reacted relatively calmly to the prospect of an unprecedented U.S. default and a damaging credit downgrade, holding out hope that a late deal will be struck.

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The dollar rebounded from recent losses on Wednesday and the Treasury managed to sell $12 billion in short-term bills and $35 billion in five-year notes, showing that bond investors still have faith in the U.S. government.

Still, ordinary Americans scarred by the 2008 financial crisis are growing more worried. They bombarded leading Congress members with telephone calls at the urging of Obama on Tuesday and financial advisers report a rise in calls asking about what to do if the government defaults.

The dysfunctional gridlock in Washington has also raised concern over the long-term decline of U.S. economic power and the status of the dollar as the world’s reserve currency.

“The U.S. is experiencing an ‘end of empire’ moment and the dollar share of global reserves is likely to fall gradually,” said Jim Leaviss, head of retail fixed income at M&G Investments in London.

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(Additional reporting by JoAnne Allen; Writing by Stuart Grudgings and Emily Kaiser; Editing by Eric Walsh and Neil Fullick)

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Senator Elizabeth Warren leads Democrats in spirited first 2020 debate

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Ten Democrats clashed in the first debate of the 2020 presidential race Wednesday with Elizabeth Warren cementing her status as a top-tier candidate and several underdogs using the issue of immigration to clamor for the limelight.

The biggest American political debate since the 2016 presidential campaign is occurring over two nights in Miami, climaxing Thursday with former vice president Joe Biden squaring off against nine challengers, including number two candidate Bernie Sanders.

But Wednesday's first take was a spirited encounter between Democrats like ex-congressman Beto O'Rourke, Senator Cory Booker, former San Antonio mayor Julian Castro and New York Mayor Bill de Blasio on subjects as varied as health care, economic inequality, climate action, gun violence, Iran and immigration.

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Here are 4 winners and 9 losers from the first 2020 Democratic primary debate

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With ten candidates on stage Wednesday, the opening debate of the 2020 Democratic primary in Miami was a packed mess. And this was only the first course in a two-part event — 10 more candidates will debate on the following night.

A crowded field makes it difficult to stand out, and that means that even after a big night like a debate, the most likely result is that not much changes. But the debate was still significant, giving candidates the chance to exceed, meet, or fall below expectations for their performances.

Here's a list — necessarily subjective, of course — of the people who came out on the top when the dust was settled, and those who came out on the bottom.

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Here are 3 ways Julián Castro stood out in the first Democratic Debate

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There were many predictions going into the first Democratic debate on MSNBC, but no one predicted that Julián Castro would break out from the crowd.

Check out the top three ways Castro stood out from the crowd.

Immigration:

The former Secretary of Housing and Urban Development was the outright winner of the immigration section of the debate

It should "piss us all off," Castro said about the father and his little girl who were found face-down in the shores of the Rio Grande River this week. “It’s heartbreaking."

Castro is a second generation American who got into specifics on immigration policy, calling for an outright "Marshall Plan" style of action for Guatemala and Honduras. He joined with other Democrats calling for an end to President Donald Trump's family separation policy, but he then suggested ending the "metering" of legitimate asylum seekers.

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