Cloudy skies shroud the Capitol in Washington, Monday morning, Oct. 14, 2013.

Image Credit: AP Photo/J. Scott Applewhite

WASHINGTON -- Hopes grew Monday for heading off a U.S. government default and ending a partial government shutdown after encouraging comments from the often antagonistic congressional leaders at the centre of the talks.

The stock market turned positive on the optimistic predictions of Senate Majority Leader Harry Reid for the Democrats and Senate Republican leader Mitch McConnell for the Republicans.

The two men met twice before midafternoon, their sessions sandwiched around a White House announcement that President Barack Obama was calling them and the party leaders in the House for the second time in less than a week to discuss the economy-threatening crises. The meeting was subsequently postponed to give the two lawmakers more time to work.

Congress has failed to pass a bill temporarily funding the government, leading to a partial government shutdown that has furloughed 350,000 federal workers. Separately, if Congress doesn't approve a measure increasing the amount of money the government is allowed to borrow, the Obama administration says it will not be able to pay its bills, risking a default that experts say could prove catastrophic for the economy.

The two normally routine pieces of legislation have become entangled in disputes over Obama's health care overhaul and overall government spending.

Visiting a charity not far from the White House, Obama blended optimism that a deal could be made with a slap at Republicans.

"My hope is that a spirit of co-operation will move us forward over the next few hours," he said. And yet, he added, "If we don't start making some real progress both in the House and the Senate, and if Republicans aren't willing to set aside some of their partisan concerns in order to do what's right for the country, we stand a good chance of defaulting."

U.S. President Barack Obama speaks to reporters as he visits Martha's Table in Washington.

Image Credit: AP/Charles Dharapak

Any legislation would require passage in the Senate and also in the House, where a large faction of conservative, tea party-aligned lawmakers precipitated the shutdown two weeks ago despite the efforts of both McConnell and Republican Speaker John Boehner. In the days since, polls show a marked deterioration in public support for the party.

McConnell also met with Boehner during the afternoon.

Officials said Reid and McConnell were discussing legislation to raise the government's $16.7 trillion debt limit until spring, staving off the possible default. It was not clear if that would permit Treasury Secretary Jacob Lew to employ a series of steps that could add additional months to the extension, as administrations in both parties have done in recent years.

Besides approving legislation to fund the government until late this year, Reid and McConnell considered appointment of House and Senate negotiators to seek a deficit-reduction agreement that could ease or eliminate a new round of automatic federal spending cuts scheduled to begin in January. While the current round of these cuts fell on both domestic programs and the military, the upcoming reductions would hit primarily the Pentagon.

Also under discussion, officials said, was a possible tightening in income verification requirements for individuals who qualify for subsidies under Obama's health care reform law.
Separately, Democrats were resisting a Republican-backed proposal to suspend a medical device tax that was enacted as part of the health care law. The tax is widely unpopular among lawmakers in both parties, and the outcome of that disagreement remained unclear.

The officials spoke on condition of anonymity, saying they were not authorized to comment on the private discussions.

Treasury Secretary Jack Lew has told Congress the deadline for raising the debt limit is Oct. 17.

He, the president and a wide array of economists, bankers and politicians in both parties -- at home and backed by world leaders -- have all warned that default could have catastrophic consequences for both the domestic and global economies.

The doubters alternatively say no default will occur or that if it does, it won't be the calamity that others claim.

But the fear of economic harm produced warnings from around the globe that the United States must not permit a default.

Christine Lagarde, the International Monetary Fund's managing director, spoke with concern about the disruption and uncertainty over the weekend, warning of "a risk of tipping, yet again, into recession" after the fitful recovery from 2008.

Senate Majority Leader Sen. Harry Reid, D-Nev., is surrounded by reporters.

Image Credit: AP/Evan Vucci

News from © The Associated Press, 2013