[Kristie Lu Stout:] And welcome to News Stream where news and technology meet. Now the clock is ticking. U.S. lawmakers still have not agreed on a plan to raise the debt ceiling. A powerful storm strikes Japan. A small island south of Tokyo is hit hard. And Sarajevo celebrates as Bosnia-Herzegovina qualifies for its first ever World Cup. Now the U.S. is creeping dangerously close to defaulting on its debts. With only hours to go now until the U.S. hits the debt ceiling. There's been a lot of talk, but so far little concrete action on Capitol Hill. Now lawmakers are trying to reach compromise on a bill to end the paralysis in government before midnight when the Treasury says the money starts running out. But lawmakers, they went home last night without a deal to allow more government borrowing after October 17. Now still Democrats and Republicans in the U.S. Senate say they may be close, but would any deal fly among House Republicans? Now Jim Acosta is following all the developments from Washington.
[Jim Acosta, Cnn Senior White House Correspondent:] Time is running out, the debt ceiling is in sight and the last best hope avenue voiding a potential default once again rests with Senate leaders Harry Reid and Mitch McConnell, who were back to working on a last-minute deal.
[Rep. Charlie Dent , Pennsylvania:] John Boehner will likely be in a situation where he will have to essentially pass the bill that is negotiated between Senators McConnell and Reid, and I believe that the House will first pass it and send it to the Senate.
[Acosta:] President Obama called for quick action.
[Barack Obama, President Of The United States:] We don't have a whole lot of time so what I'm suggesting to the congressional leaders is let's not do any posturing. Let's not try to save face.
[Acosta:] The president appeared to put the blame on House Speaker John Boehner's inability to corral the Tea Party-backed Republicans.
[Obama:] There have been repeated situations where we have agreements, then he goes back, and it turns out that he can't control his caucus.
[Acosta:] That caucus is once again up in arms despite Boehner's tough talks.
[Rep. John Boehner , Speaker Of The House:] I have made clear for months and months that the idea of default is wrong and we shouldn't get anywhere close to it.
[Acosta:] The speaker failed to convince House conservatives to line up behind Republican proposals to lift the debt ceiling and end the shutdown. It didn't matter anyway, as Reid said the GOP's plans were dead on arrival in the Senate.
[Sen. Harry Reid , Majority Leader:] Extremist Republicans in the House of Representatives are attempting to torpedo the Senate's bipartisan progress, with the bill that can't pass the Senate.
[Acosta:] That portrait of Washington dysfunction was all the respected Fitch ratings agency needed to see. Fitch issued a warning that may downgrade the nation's AAA credit rating, a potential repeat of what Standard & Poor's did after the last ceiling debate of 2011. Although Fitch continues to know that the debt ceiling will be raised soon, the agency said the political brinksmanship could increase the risk of a U.S. default. Some House conservatives were brushing off talk of dire consequences to come.
[Unidentified Male:] I think most folks understand October 17th is not the drop dead date. There are no payments due for a couple weeks.
[Acosta:] Jim Acosta, CNN, Washington.
[Lu Stout:] Now the U.S. hits the debt ceiling at midnight. Essentially that deadline is a red flag that the U.S. does not have enough money to pay all its debts. Now the U.S. Treasury Secretary has said that the U.S. will have around $30 billion on hand to pay almost double that amount in daily bills. But it does not signal financial apocalypse, well not immediately anyway. Now the first signs of trouble will likely be seen on the world stock markets. Analysts say if the U.S. fails to make an interest payment on its debt, markets will crash. Now some predict the Dow could drop some 1,000 points. Now it fell almost 1 percent on Tuesday. Now the further the markets fall, the greater the chance of an economic slowdown. Now interest rates will also start to tick up, meaning borrowing money will become more expensive and it'll become more difficult to get a loan. Now in the U.S. recipients of Social Security benefits as well as Medicare and Medicaid payments could see delays. And if the U.S. does default on its debt, the ripple effect, it will be felt across the globe, in particular in country's holding a lot of debt like China. Now David McKenzie reports on the fallout there.
[David Mckenzie, Cnn International Correspondent:] Deal or no deal: with just hours to go to a U.S. default, foreign leaders are getting very nervous indeed. If the debt ceiling is breached and the U.S. can't pay its bills, China, the largest foreign owner of U.S. debt, will be one of the biggest losers. The Chinese economy would have enormous exposure to a default. This country owns more than $1 trillion of U.S. Treasury bills. And economists tell me that officials at the People's Bank of China are preparing for a Doom's Day scenario, a default that would cause a global chain reaction.
[Yonghao Pu, Ubs Wealth Management Research:] So you have a start with liquidity risk, then you have a credit risk and also on this kind of chain reaction. I would imagine that if the U.S. does default its debt, the consequence of [inaudible] is going to be 10 times more serious than the Lehman Brother go under. So the consequence is just enormous.
[Mckenzie:] With unthinkable consequences, most economists still believe that U.S. lawmakers will broker a deal to avoid an unconstrained default. But the threat of a default has given Chinese state media a huge PR opportunity. Xinhua proclaiming that the U.S. fiscal failure warrants a de- Americanized world.
[Willy Lam, The Chinese University Of Hong Kong:] For the past several years, Beijing has been trying to project this soft power, namely that the China model perhaps is the best for the world, particularly for developing countries. So this fiscal mess, which Washington has gotten into I think has provided them with a good excuse, ample ammunition to shoot down the so-called American consensus.
[Mckenzie:] It's a message that the Communist Party hopes plays well at home and abroad and pushes their agenda as the world's second largest economy to have more fiscal clout on the world stage. China's wildly successful export-driven economy creates enormous cash surpluses. And for decades, the U.S. has been the only market big enough and safe enough for China's technocrats to park much of their cash and help their own export market thrive. Even with the debt ceiling shambles, China doesn't have a quick fix alternative.
[Pu:] Unless China's government willing to switching from export-driven model towards more consumption or more balanced growth model, you don't have much choice in fact.
[Mckenzie:] A long-term goal of the Chinese government, yes. In the short-term, and even the medium-term, China will have to put up with D.C.'s dysfunction, because it still needs U.S. debt just as much as the U.S. needs China's cash. David McKenzie, CNN, Beijing.
[Lu Stout:] Now you're watching News Stream. And still to come this hour, death and destruction in Japan as the powerful typhoon hits the Tokyo area. We'll get an update on its path from CNN's Mari Ramos. And her real-life story has been turned into a movie. A former sex slave tells CNN about her escape from a nightmare. And it is qualifying time ahead of next year's FIFA World Cup. Find out which countries are making the cut.