Republicans offer plan to postpone U.S. default

By Richard Cowan and Thomas Ferraro

WASHINGTON (Reuters) - Republicans in the House of Representatives offered a plan on Thursday that would postpone a possible U.S. default and urged President Barack Obama to negotiate an end to the 10-day government shutdown.

The move signaled a new willingness by Republicans to break a standoff of their own making that has thrown America's future creditworthiness into question.

The White House said it would consider the offer.

The proposal is a significant shift for Republicans, who had hoped to use the disruption to extract concessions on spending and healthcare from President Barack Obama.

Those goals remain, but the Republican offer would at least push off the threat of default from October 17 until possibly the middle or end of November.

The Republican offer would not reopen the swaths of the government that have been closed since October 1. Republican leaders said they would discuss the matter with Obama at a White House meeting on Thursday.

"It's time for these negotiations and this conversation to begin," House Speaker John Boehner told reporters after presenting the plan to his fellow Republicans.

The White House cautiously welcomed the offer, but reiterated that Congress must first reopen the government before budget talks can begin.

"The president is happy that cooler heads at least seem to be prevailing in the House," Carney told reporters. Carney also cautioned that the White House has yet to see details of the Republican proposal.

Many rank-and-file Republicans also appeared to be skeptical of Boehner's plan. Boehner's grip over his troops has been tenuous this year and many of the chamber's most conservative lawmakers have defied him repeatedly on other crucial votes.

REBELLIOUS MEMBERS

Boehner has taken pains to show his party's most rebellious members that he listens to their concerns. But at this meeting, he did not ask lawmakers for permission to advance the plan - he told them it was going to happen, aides said.

Many Republicans left the meeting grim-faced and refused to speak with reporters.

Still, investors seemed to be heartened by the development. U.S. stocks indexes were up more than 1 percent in early afternoon trading.

The Obama administration says it will be unable to pay all of its bills if Congress does not raise the $16.7 trillion debt ceiling by October 17. Treasury Secretary Jack Lew said he would be unable to prioritize some payments over others among the 30 million transactions his department handles each week.

"It would be chaos," Lew told the Senate Finance Committee.

The Republican plan would postpone that day of reckoning by roughly six weeks, which would give them more time to seek spending cuts, a repeal of a medical-device tax, or other measures they say are needed to keep the national debt at a manageable level.

Democrats have called for a debt-ceiling hike that would extend government borrowing authority for more than a year.

The House could vote on the measure as early as Thursday afternoon, though timing remained unclear. House leaders canceled a planned recess and said they would remain in Washington next week to keep working on the problem.

Opinion polls indicate that Republicans appear to be getting more of the blame for the standoff. The Republican Party's approval rating now stands at a record low of 28 percent, according to Gallup, down 10 points from pre-shutdown levels. The Democratic Party's approval rating has dipped slightly to 43 percent.

Business groups that have close ties to the Republican Party have also pressed for an end to the brinkmanship and some are laying plans to mount primary challenges next year to lawmakers who refuse to raise the debt ceiling.

With the October 17 deadline a week away, Obama is scheduled to meet with House Republican leaders at 4:35 p.m. EDT (2035 GMT). He is also due to meet separately with Senate Democrats and Senate Republicans.

The plan would do nothing to resolve Republican objections to Obama's healthcare reform law, the Affordable Care Act, which prompted the October 1 shutdown as Republicans pushed to delay or defund the law.

Hundreds of thousands of federal employees have been out of work since then and individual businesses, from arms makers to motels, have begun to lay off workers as well.

The Labor Department said on Thursday that 15,000 private-sector workers have filed for unemployment benefits due to the shutdown.

House Republicans have passed bills that would reopen portions of the government and otherwise ease the pain of the shutdown, but they still hope to tie a full restoration of government funding to conditions that would undercut "Obamacare," as it is popularly known.

The latest offer could complicate efforts to reopen the government, as conservatives may feel emboldened to dig in their heels further in return for extending the debt ceiling.

House Republicans offered their plan after Heritage Action, an influential conservative group, said it would not oppose a short-term increase in the debt limit.

Heritage Action said, however, it wants House Republicans to return the focus of the fight over the government shutdown to demands for a rollback in Obamacare.

(Additional reporting by Jason Lange, Steve Holland, Roberta Rampton and Mark Felsenthal; Writing by Andy Sullivan; Editing by Claudia Parsons, Fred Barbash and Vicki Allen)