lawmakers scramble to close in on a deal

Here is what is happening on Friday as lawmakers scramble to close in on a deal for Congress to raise the U.S. government's $14.3 trillion borrowing limit by an August 2 deadline and avoid a debt default:

* The House of Representatives passed a Republican deficit-reduction plan that had no chance of becoming law but could pave the way for a last-ditch bid for bipartisan compromise to avert a debt default.

The Republican-controlled House pushed through the measure by a partisan vote of 218-to-210 after the party's leaders reworked it to appease anti-tax conservatives. No Democrats voted for it.

As expected, the Democratic-controlled Senate blocked the bill.

* Senate Democratic leader Harry Reid said he will start Senate action on a compromise debt and deficit plan and called on Senate Republican leader Mitch McConnell to work with him. Reid says a short-term debt limit extension is unacceptable. The Senate could vote early Sunday morning.

* The White House urged lawmakers to begin immediate work on a compromise to lift the debt limit after the defeat of the Republican House bill.

* President Barack Obama said earlier that if the United States loses its AAA credit rating it won't be because the country can't pay its bills. It would be "because we didn't have an AAA political system to match our AAA credit rating."

* The U.S. Treasury is preparing an emergency plan for how the government would function and pay its obligations if Congress fails to raise the government's borrowing authority. Treasury officials say they will provide more information on their plans as the August 2 deadline draws near.

* The Treasury is due to announce next week its borrowing needs for the current quarter and its plans for selling debt to meet those needs. The uncertainty over the debt ceiling could jeopardize the plan. Treasury officials met with primary-market dealers and a Treasury official says dealers agree Congress should act quickly and raise the debt limit for as long as possible.

* Investors are growing increasingly alarmed by U.S. lawmakers' inability to reach accord on the debt ceiling and are watching developments in Washington closely. U.S. stock prices remain weak.