As the US inched closer to an unprecedented debt default, US lawmakers on Tuesday held a flurry of negotiations and expressed optimism over a potential deal that could end the government shutdown, raise the debt ceiling and avert a crisis that may trigger a global economic turmoil.
US senators say they are closing in on a deal that would reopen the government and push back a possible debt default for several months, though many hurdles remain.
Senate majority leader Harry Reid said he and his Republican counterpart, Mitch McConnell, have "made tremendous progress. We are not there yet".
"We hope that with good fortune ... That perhaps tomorrow will be a bright day," he said from the Senate floor.
Reid and McConnell are trying to reach an agreement that would end the 14-day-old shutdown and lift the debt limit before the US Treasury exhausts the nation's remaining borrowing capacity on October 17, raising the risk of default.
"We've had a good day, we had a good day yesterday," McConnell said.
"It's safe to say we've made substantial progress and we look forward to making more progress in the near future.
"I share [Reid's] optimism that we we're going to get a result that will be acceptable to both sides," he said on the Senate floor.
The new deal, if struck, would last until February 2014.
The plan under discussion would raise the USD 16.7 trillion debt ceiling by enough to cover the nation's borrowing needs at least through until mid-February 2014.
According to US media, the deal currently under discussion would fund the government until January 15 while raising the debt ceiling until early to mid-February.
Any deal would also have to win approval in the House of Representatives, where conservative Republicans have insisted any continued government funding must include measures to undercut president Barack Obama's signature health law - a nonstarter for Democrats.
The deal would not resolve the disagreements over long-term spending and health care that led to the crisis in the first place.
"If Republicans aren't willing to set aside their partisan concerns in order to do what's right for the country, we stand a good chance of defaulting, and defaulting could potentially have a devastating effect on our economy," Obama said earlier.
Obama cited progress in the Senate negotiations but also warned of what he called continued partisan brinkmanship by House Republicans who "continue to think that somehow they can extract concessions by keeping the government shutdown or by threatening default."
"My hope is a spirit of cooperation will move us forward over the next few hours," Obama said.
Such a deal would amount to a clear retreat for Republicans who have sought to tie any continued funding and borrowing authority to measures that would undercut Obama's Affordable Care Act.
Earlier, the White House postponed a meeting with congressional leaders in order to give negotiators more time to work out a deal.
The White House warned that the looming prospect of an unprecedented debt default by the world's largest economy was a "terrible" scenario that would harm America's democracy and global stature.
The IMF also warned that an imminent debt default would result in disruptions in financial markets and could possibly trigger global economic turmoil.