WASHINGTON – House Republican leaders canceled votes Tuesday night on a proposal to reopen federal agencies and lift the debt ceiling, shifting the onus back onto the Senate to finalize a deal to avoid a default that could undermine the U.S. economy.

Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., resumed negotiations soon after House leaders scrapped plans to bring a revised bill to the floor amid disagreement within Republican ranks.

Senate Democratic leaders expressed optimism that a deal was close at hand, with votes likely on Wednesday. But the Senate will have to work fast to broker a deal able to pass both chambers before a Thursday deadline. And nerves were high after the stock market fell and one rating agency put the U.S. on a credit “watch.”

“We are making good progress,” said Sen. Chuck Schumer, D-N.Y., one of the key Senate negotiators. “Things look a lot better than they did several hours ago.”

Tuesday’s stops and starts left lawmakers frustrated at times, however.

“This is terrible. Look at what the American people are being subjected to,” Sen. John McCain, R-Ariz., said Tuesday afternoon.

McCain is among more than a dozen bipartisan senators in a group led by Sen. Susan Collins, R-Maine, that had proposed their own compromise. The group also includes Sen. Angus King of Maine. Democratic leaders rejected a version of that plan last weekend, but the proposal provided a framework for Reid and McConnell’s negotiations.

Schumer declined to provide details of the emerging deal late Tuesday; however, an earlier proposal between Reid and McConnell would have funded government through Jan. 15 and extended the debt ceiling to early or mid-February. The Senate deal also would have required negotiations on long-term deficit reductions and given federal agencies additional flexibility to absorb across-the-board spending cuts known as “sequestration.”

Collins’ office did not return multiple calls and emails from the Portland Press Herald seeking comment on the developments and her group’s negotiations. Collins told reporters earlier in the afternoon that she still believed the Senate “needs to go first” and that her group’s plan “is the best way forward,” although she was pleased Reid and McConnell’s proposal adopted elements of their plan.

“I think the Senate needs to proceed,” she said. “I hope there will be a strong vote and maybe that would give some momentum for the House to act.”

The House’s inaction effectively left the Senate where it had been one day earlier. The Treasury Department has warned that, after Thursday, it will eventually exhaust its ability to juggle the nation’s finances to avoid a default in the coming days or weeks.

Underscoring the potential risks of the congressional stalemate, one of the major credit agencies, Fitch Ratings, put the U.S. on “negative watch” on Tuesday. The New York Stock Exchange also fell 133 points Tuesday in response to the ongoing political discord in Washington.

Fitch Ratings cited “political brinksmanship” and the increased risk of a federal default after Oct. 17 when the agency announced the warning.

“The Treasury may be unable to prioritize debt service, and it is unclear whether it even has the legal authority to do so,” Fitch wrote. “The U.S. risks being forced to incur widespread delays of payments to suppliers and employees, as well as social security payments to citizens – all of which would damage the perception of U.S. sovereign creditworthiness and the economy.”

Social Security is one of countless federal programs that could be affected if the government were forced to decide which bills to pay on time and which to delay. Treasury Secretary Jack Lew warned that timely payments for Social Security, Medicare, active-duty military personnel and veterans could be put “at risk” if U.S. obligations exceed the $30 billion in cash that he estimated would be on hand sometime after Oct. 17.

While delayed payments would have severe impacts nationwide, the financial pain could be disproportionately acute in Maine.

Nearly one-quarter of Maine’s 1.3 million residents received Social Security benefits last year, the second-highest percentage in the country. Maine was also tied with West Virginia as having the highest percentage of residents on Medicare, ranked second for residents on Medicaid and has the fourth-highest population of veterans per capita.

Tuesday started with high hopes of a deal in the Senate. But the Republican-controlled House has been the wild card in the budget and debt ceiling debate. And by late afternoon, it was clear that the biggest obstacle to a deal lay within the House Republican caucus.

House Republican leaders proposed several legislative packages only to withdraw, revise and then withdraw them again in response to opposition from conservative members. The White House also vowed a veto of a mid-afternoon proposal.

Before House Speaker John Boehner canceled the planned votes, Republican Rep. Steve Womack of Arkansas resorted to his military experience to explain the behind-the-scenes strategizing at work as his caucus tried to force changes to Obamacare in the face of Senate Democratic opposition.

“I can tell you we are always concerned about the tactical battle today, but we are equally concerned about the next battle,” said Womack, a member of the House Appropriations Committee. “I would expect that what we send over there, … it is quite possible that something gets stripped out or something gets tacked on. And then we’re back over here.”

The House Republican bill that was pulled from consideration Tuesday would have extended the debt ceiling through Feb. 7 but funded government only until Dec. 15, thereby forcing additional negotiations with Democrats before Obamacare programs begin on Jan. 1.

Additionally, the House Republican proposal would have prohibited the federal government from making health care contributions – similar to employer contributions in the private sector – for insurance for members of Congress, the president, the vice president and White House staff.

Though the House failed to muster sufficient support for a conservatives-only bill in the GOP-majority chamber on Tuesday, enough Republicans there seem likely to join House Democrats to approve a bipartisan version if it can be approved by the Senate and sent to them, The Associated Press reported.

While both parties are being hurt politically by the impasse, polls indicated that Republicans are bearing the brunt of public unhappiness as survey after survey shows their approval ratings plunging.

Earlier Tuesday, King was so frustrated about the proposals coming from House Republicans that he was struggling for words – a rare thing, he acknowledged. King, an independent who caucuses with the Democrats, was among the dozen-plus senators involved in Collins’ group.

“This is the height of irresponsibility. I have never seen this,” said King, a former Maine governor serving his first year in the Senate. “I have dealt with legislatures off and on for 35 years and I have never seen anything like this. And the stakes are so high.”

Members of the bipartisan group of lawmakers that have been working with Collins and Sen. Joe Manchin, D-W.Va., met again late in the afternoon as House Republicans struggled to coalesce around a plan.

“We continue those discussions so that our group, if leadership does not come together, … can come together around something to get this resolved,” Sen. Kelly Ayotte, R-N.H., said earlier Tuesday.

Kevin Miller can be contacted at (207) 317-6256 or at:

kmiller@pressherald.com

Twitter: KevinMillerDC