Republican leaders in the House of Representatives, facing a conservative revolt, unexpectedly put off a vote Thursday night on a bill to increase the U.S. debt limit, creating more turmoil as a deadline for avoiding a government default was only days away.
Republican leaders failed to muster enough votes to pass the bill through the lower chamber and announced their decision to not hold a vote Thursday night. They abruptly halted debate on the legislation and plunged into an intensive round of meetings with rebellious conservatives.
The decision added a new level of uncertainty to the debate that has roiled Washington all summer. The divided U.S. government has struggled to head off a default threatened after Tuesday, when the Treasury would be left without the funds needed to pay its bills.
Demoralized Republicans will try again Friday, and will be under tremendous pressure to pass something. If they continue to fail to pass a bill, the Democratic-controlled Senate could pass legislation first, which would increase President Barack Obama's leverage. Obama and Senate Democrats could shape a bill to their liking and then dare the House to reject it and send the nation into default.
House Speaker John Boehner and other Republican leaders had labored furiously to line up the votes the debt bill would need to pass the House. Enough conservative Republicans, opposed to the Boehner bill because they said it didn't cut federal spending enough, had been thought to have agreed to back the measure earlier Thursday.
Even if the Republicans manage to push the bill through the House, Obama has threatened to veto it and Senate Democrats stood by ready to scuttle it, forcing negotiations on a compromise.
The main area of dispute between the two parties is the House Republicans' insistence on returning to the issue of raising the debt ceiling again next year, in the middle of the 2012 election campaign. Obama, who faces re-election, has insisted that the ceiling be increased enough to push the issue beyond the 2012 vote.
Obama says re-igniting the debt ceiling fight in 2012 would needlessly hurt the economy, because investors would be unnerved by such a drawn-out, uncertain scenario.
On Thursday night, the first sign of trouble for the House bill's supporters occurred after hours of routine debate, when the Republican leadership suddenly halted work on the measure.
As the evening slipped by Boehner summoned a string of Republican critics of the bill to his office. Later, he visited an office where lawmakers were congregating around 19 boxes of pizza that were rolled in.
With the bill in limbo, a few first-term conservatives slipped into a small chapel a few paces down the hall from the Capitol Rotunda, as they contemplated one of the most consequential votes of their careers.
Asked if he was seeking divine inspiration, Republican Rep. Tim Scott said that had already happened. "I was leaning no and now I am a no," he said.
Fears that the U.S. government would not break the impasse and increase its cap on borrowing forced stock markets down yet again as investors worried that a dysfunctional Congress might remain gridlocked past the Tuesday deadline.
U.S. stocks have fallen all week. They fell again Thursday, with the Dow Jones industrial average declining 0.5 percent, the fifth straight daily drop. Had the delay in the House vote occurred before the market closed about two hours earlier, the effect might have been more dramatic.
Markets across Asia and Europe opened down Friday and fell further during the morning as anxious traders watched developments in Washington.
The dollar has weakened sharply, particularly against the yen -- a big problem for the Japanese economy, which relies heavily on exporters.
The talks deadlock in Washington also contributed to bond market jitters in Europe, keeping investors nervous only a week after euro countries agreed to a new debt crisis plan.
Without legislation in place by the Tuesday deadline, the White House says the Treasury will run out money, possibly triggering a default that could be disastrous for an economy still wobbly after the Great Recession. That could send shockwaves through the global economy.
The Treasury Department moved ahead with plans to hold its regular weekly auction of three-month and six-month securities on Monday. Yet officials offered no information on what steps would be taken if Congress failed to raise the nation's $14.3 trillion debt limit by the following day.
Earlier, Boehner had exuded optimism about his bill, which would cut spending by nearly $1 trillion.
"Let's pass this bill and end the crisis," said the president's principal Republican antagonist in a new and contentious era of divided government. "It raises the debt limit and cuts government spending by a larger amount."
Some House conservatives still weren't ready to get on board, however, and their number appeared to have been sufficient to postpone the vote.
House Republicans have been vexed by the debt limit issue since they gained control of the lower chamber in January and promised to end the way Washington did business.
Some members aligned with the conservative tea party movement that helped fuel the Republican victories in the 2010 elections decided that Boehner had given up on them by negotiating with Obama on possibly increasing government revenues as part of a comprehensive deal.
The debt debate has resonated with average Americans, especially those dependent on their monthly Social Security pension payments. Switchboards at Congress have been at capacity this week, slammed by constituents phoning in to be heard.
Obama supports Senate Majority Leader Harry Reid's bill, which also cuts spending but pushes the debt issue beyond 2012. The Senate measure does not include increased tax revenue, which had been a key Obama requirement.
The White House taunted Republicans as they struggled to pass their bill Thursday night.
"Another day wasted while the clock ticks, now is the time to compromise so we can solve this problem and reduce the deficit," Obama's communications director Dan Pfeiffer tweeted.
Reid hinted a compromise could be easy to pull together quickly because his plan has enough in common with Boehner's-- including the establishment of a special congressional panel to recommend additional spending cuts this autumn.
Others were hopeful that the gridlock might be giving way.
"Around here you've got to have deadlock before you have breakthrough," said Democratic Sen. Kent Conrad. "We're at that stage now."
Associated Press writers Andrew Taylor, David Espo, Alan Fram, Jim Abrams, Laurie Kellman, Stephen Ohlemacher, Donna Cassata, Nancy Benac, Ben Feller, Jim Kuhnhenn, Erica Werner and Carlo Piovano contributed to this report.