With world watching, Congress against wall for last-minute fiscal solution

The statue of Grief and History stands in front of the Capitol Dome in Washington October 15, 2013. Stop-start negotiations to end the U.S. fiscal impasse left congressional leaders and President Barack Obama desperately searching on Tuesday for a way to reopen the government and raise the country's debt limit ahead of a Thursday deadline. Joshua Roberts / REUTERS

By Carrie Dann, Political Reporter, NBC News

The nation is just hours away from a crucial deadline to avert default on its debts and Washington remains muddled in a risky legislative process that has the American people and the rest of the world holding its collective breath.

After a furious day of Republican proposals ended with a thud and no House votes to advance a plan, lawmakers have even less time to approve a measure to increase the nation’s borrowing power and end a dragging government shutdown.

Andrew Ross Sorkin, of CNBC and The New York Times, explains why it's so important that the U.S. avoid defaulting on its debt – and how the damage could impact Americans.

Senate leaders say they are closing in on a deal that could pass the upper chamber with bipartisan support but it’s unclear how fast they can get it to the president’s desk.

Here’s where things stand:

• The Dow Jones Industrial closed 133 points down as hope for progress in Congress bubbled and then waned Tuesday. After markets closed, Fitch Ratings put the United States on “rating watch negative,” signaling that it could downgrade the country’s current AAA rating if the debt limit is not raised. Unless there’s clear momentum for a bill to be approved by both houses, markets could slip even further Wednesday morning.

• Key Senate leaders have resumed their on-again off-again talks after putting the negotiations on ice early Tuesday. By late Tuesday, ongoing talks between Democratic Senate Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell appeared to be down to the dotting of I’s and the crossing of T’s. "The nerds have to work," McConnell spokesman Don Stewart said, referring to legislative staffers that are now writing the details. But, while McConnell and Reid will be armed with decades of experience and a keen understanding of procedure, Senate rules could still allow Tea Party favorite Sen. Ted Cruz or other dissenters to slow the consideration of the bill until after the Thursday deadline.

As the possibility of a debt default looms on the horizon, Tea Party conservatives refuse to back down unless there are changes to Obamacare. NBC's Kelly O'Donnell reports.

• Republican House Speaker John Boehner may be jammed. House leaders abruptly pulled a bill from consideration that would have reopened the government until December and lifted the debt ceiling until January. That measure failed to garner support from conservatives who wanted more health care-related concessions from Democrats, so Boehner nixed a Tuesday evening vote rather than face a damaging failure on the House floor. Without a clear proposal that could pass both the GOP-dominated House and the Senate, Boehner faces enormous pressure to put a Senate-passed compromise on the floor to be passed with Democratic votes, even if it risks a mutiny among conservatives in his own party.

• President Barack Obama has no public events scheduled for Wednesday, although he will meet behind closed doors with Vice President Joe Biden and Treasury Secretary Jack Lew. “My expectation is it does get solved but we don't have a lot of time,” he said in an interview Tuesday with WABC. “What I'm suggesting to the congressional leaders is let's not do any posturing, let's not try to save face, let's not worry about politics. Do what's right.” Obama did not speak with Boehner by phone on Tuesday, aides said.

IMF Managing Director Christine Lagarde expresses her concerns about the U.S. government shutdown and impending debt ceiling crisis.

The waning days of budget wrangling come as the U.S. government also faces immense global pressure to reach a deal. In an appearance Sunday on NBC’s "Meet the Press," International Monetary Fund Managing Director Christine Lagarde said that U.S. default “would mean massive disruption the world over.” Chinese Vice Finance Minister Zhu Guangyao slammed “the attitude of the Tea Party” and told lawmakers to “take concrete measures” to avoid default.

Even if a deal is formally announced Wednesday, there’s no guarantee that the long-awaited firm fiscal stability would last for long.

Most of the floated proposals from both chambers of Congress have only extended government spending and the debt limit by a number of months. A compromise now could set up similar fights for early next year.