With the U.S. moving perilously closer to defaulting on its loans, the House on Friday evening passed an increase in the federal debt limit tied to progress on a balanced budget, but the Senate responded less than two hours later by putting the House bill on ice.
The House bill was Speaker John Boehner's third version of a deficit-reduction plan, and it passed in a 218-210 vote, with all House Democrats opposed, as well as 22 Republicans. The provision laying the groundwork for a constitutional amendment mandating a balanced budget was pivotal in securing the support of hard-line Republicans, but it also helped assure the bill, as is, would be rejected by the Democratic-led Senate.
Senate Democrats are working on rival legislation ahead of the Treasury's Tuesday deadline to increase the debt limit, and Majority Leader Harry Reid hopes to have their version up for a vote this weekend -- presumably with compromise measures that, they hope, will win over enough Republicans in the House.
The White House looked past the Boehner bill to a compromise that the president will sign.
"Now that yet another political exercise is behind us, with time dwindling, leaders need to start working together immediately to reach a compromise that avoids default and lays the basis for balanced deficit reduction," White House Press Secretary Jay Carney said in a statement after the vote.
Boehner rallied his troops around his plan in a passionate speech on the House floor ahead of the vote that drew roaring applause from Republicans.
"I stuck my neck out a mile to get an agreement with the president of the United States," he said. "It's time for the administration and time for our colleagues across the aisle to put something on the table. Tell us where you are!"
The vote in the Senate to reject the House legislation was 59-41, with all Democrats, two independents and six Republicans joining in opposition.
Moments later, Reid unveiled an alternative that would cut spending by $2.4 trillion and raise the debt limit by the same amount, enough to meet Obama's terms that it tide the Treasury over until 2013.
Reid invited Republicans to suggest changes, saying, "This is likely our last chance to save this nation from default."
The Senate GOP leader, Mitch McConnell of Kentucky, accused Democrats of "rounding up `no' votes to keep this crisis alive," and noted the House had passed two bills to raise the debt limit and the Senate none.
The House, eager to return the Senate's favor rejecting the Boehner bill, set a vote to reject Reid's proposal on Saturday. The Senate set a test vote for shortly after midnight on Sunday, a middle-of-the-night roll call that underscored the limited time available to lawmakers.
At the same time Reid appealed for bipartisanship, he and other party leaders accused Boehner of caving in to extremists in the GOP ranks -- "the last holdouts of the tea party," Sen. Richard Durbin of Illinois called them.
Final votes on the Senate bill are possible by dawn Sunday morning.
A framework that would be under serious discussion is a hybrid of the various proposals. It would raise the debt ceiling in two stages: the first would feature the Boehner bill's cuts (about $900 billion) and raise the debt ceiling through this year.
The second debt ceiling increase would occur if the president sent a request to Congress. Lawmakers would have to disapprove of the increase with a super majority to deny the increase. The bill would feature a commission to find savings from revenue and entitlements and authorize deep spending cuts without a commission plan passing Congress.
Earlier Friday, Obama said it's time to move forward with debt-reduction legislation that can be supported by both political parties. Obama said Reid has introduced cuts that can be supported by Republicans and Democrats, adding that he needs a plan he can sign by Tuesday, the deadline imposed by the administration as the drop-dead date for avoiding default on the nation's debt.
Administration officials say that without legislation in place by the end of Tuesday, the Treasury will no longer be able to pay all its bills. The result could inflict significant damage on the economy, they add, causing interest rates to rise and financial markets to sink.
"We are almost out of time. We need to reach a compromise by Tuesday so the country will have the ability to pay its bills on time, as we always have. ... Keep in mind if we don't do that, if we don't come to an agreement, we could lose our credit rating, " Obama said in the latest of several addresses to the nation, including a prime-time address at the beginning of the week.
"It's clear now that any solution to avoid default must have the support of both parties," he added, noting that if the nation's credit rating were downgraded it would be because "we didn't have a triple-A political system to match our triple-A credit rating."
Reid passed on warnings by Treasury Secretary Tim Geithner that the prospects of default are growing.
The international community is very worried, Reid said Geithner told him, adding that the ability to get loans will become more difficult. Credit ratings agencies have also warned that unless Congress gets on a serious path to debt reduction, it could reduce the country's stellar AAA rating.
Fox News' Chad Pergram, Fox Business' Rich Edson and The Associated Press contributed to this report.