By MICHAEL FALCONE ( @michaelpfalcone )

NOTABLES

• CLOSE, BUT NOT CLOSE ENOUGH: With the clock running out before the country's debt limit is reached, Congress will need to work feverishly today to pass compromise legislation that would extend the debt ceiling and end the government shutdown, ABC's ABBY PHILLIP notes. After a day of legislative fits and starts in the House of Representatives that yielded little progress, the hope now lies in the Senate, where Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., have worked for days to craft compromise legislation. Both sides say they believe those talks will soon yield a proposal that would pass the Senate and eventually be taken up in the House. But what happens there could test what little political strength House Speaker John Boehner, R-Ohio, has left. http://abcn.ws/1bVX68i

• COULD THE BUDGET VOTE ACTUALLY START IN THE HOUSE, RATHER THAN THE SENATE? Those discussions are underway now, Congressional aides tell ABC's JEFF ZELENY, which would simply be a procedural move that could be the best scenario for resolving all of this today. Speaker Boehner hasn't ruled it out - essentially taking the Senate deal to the House floor first - but he also hasn't signed off on it. And it may be unlikely that he agrees. Even though he would have to get Democratic votes anyway, starting it first could be too high of a hurdle to climb. The advantage of starting in House is primarily one thing: Speed. The House could move more quickly because no filibusters are allowed and could send the bill to the Senate as a "message," which could be instantly approved and be done today. This could only work, aides tell ABC News, if all four top Congressional leaders (Reid, McConnell, Boehner, Pelosi) hold hands and reach an agreement on this today. It is one of the many options being discussed as a new sense of urgency hangs over the Capitol.

• DAMNED IF YOU DO, DAMNED IF YOU DON'T: If Speaker Boehner insists on passing legislation with a majority of his caucus, he would be forced to amend a Senate proposal. Democrats have encouraged him to take up the Senate's proposal with help from Democratic votes, but such a scenario would be a damaging political defeat for Boehner who has already struggled to corral his unruly caucus. Either way Republicans now face the reality that they will not get any major concessions in exchange for raising the debt limit and re-opening the government. Neither the Senate plan nor the House's short-lived proposal defunded or postponed President Obama's health care law, which was the center of tea party Republican demands for re-opening the government. And even more modest concessions put forward by Boehner - for example to repeal the unpopular tax on medical devices and repeal government subsidies for congressional and administration staffers' health care - could not get enough Republican support to pass. http://abcn.ws/1bVX68i

THE ROUNDTABLE

ABC's RICK KLEIN: The string has played out. But that doesn't mean someone won't try to make more yarn. The House Republicans' inability to pass its own plan to avoid a default and reopen the government had all the marks of a last act of defiance by tea-party holdouts and others who thought the fight was the right one to get into in the first place. And yet, assuming the Senate deal comes together in short order, the actions of any one senator can delay any legislation well beyond the debt ceiling D-day that is tomorrow. (Ted Cruz and Mike Lee know they don't need friends for this fight, but they can still make new enemies.) Then the ultimate decision comes back to where it started: with House Speaker John Boehner. Boehner has designed every move these past three weeks to maximize his conference's unity. But this last move will require him to lead in a different direction to avoid default and end a shutdown that will be long remembered for what wasn't accomplished as a result.

ABC's JEFF ZELENY: It's back to the Senate, where Harry Reid and Mitch McConnell are once again left with the task of ending a messy - and soon disastrous - fiscal impasse. Even though they're working to present their deal today, the plan has a few more hurdles. The first is whether Ted Cruz or others will throw up a procedural roadblock. (Many Republicans assume he won't, believing it's not wise to have his fingerprints on a default.) But whenever the bill passes the Senate, the second hurdle remains the House. While the House GOP has lost nearly everything it tried to get on this deal, they haven't given up their will to fight. And that's why one question rises above all: Will Speaker Boehner put the Senate plan to a vote with Democratic support and assume the role of what many people at the Capitol are calling 'The Rational Man?'

ABC's RICHARD DAVIES: Wall Street is not panicking - yet. Stocks dropped yesterday on the threat of a U.S. government debt default after four straight days of gains. The Dow Jones index fell 133 points, but futures rose this morning. As of tomorrow the Treasury Department says it will no longer be able to borrow money and will have to rely on cash reserves of about $30 billion to pay its debt obligations. But Nov. 1, not tomorrow, may be the real default date. That's when $67 billion in payments to Social Security recipients, members of the military, retirees, and Medicare providers come due. "November 1 is really the doomsday date," says former trader and economist Stephen Guilfoyle, echoing the view of many money managers. "But just the shock to the faith and credit of the US government, I think the damage to the reputation will be done if it goes past Thursday."

DEBT DEFAULT 101: WHAT HAPPENS TOMORROW? (OR NOT)

By DEVIN DWYER

http://abcn.ws/1cSIoOV

1. What is the Oct. 17 "debt ceiling deadline" and why does it matter? By the end of the day Oct. 17, the U.S. Treasury will max out its ability to borrow money and be left only with the cash on hand to pay bills going forward. The Treasury estimates it will have just $30 billion in cash reserves as of Oct. 18, plus any daily cash inflows (tax revenue) thereafter. This would be uncharted and unpredictable territory for the U.S. government. We have never before operated without the ability to borrow more money.

2. When will the U.S. go into default? The short answer: Sometime after Oct. 17 and likely before the end of the month. But default will not happen when the clock strikes midnight on Oct. 18. We do not know the precise day or time when the U.S. will be unable to pay all its bills in full and on time. The nonpartisan Congressional Budget Office estimates a technical default would occur between Oct. 22 and Nov. 1. The independent Bipartisan Policy Center projects default could hit between Oct. 18 and Nov. 5. There is no official estimate for a date or time of actual default.

3. Why don't we know an exact date for default? Treasury officials and independent economists say it's impossible to know how quickly the government's cash on hand will disappear after Oct. 17. Daily inflows of tax revenue are notoriously "variable and irregular," as are changes in expenditure flows under sequestration and the behavior of investors in Treasury securities. No one can predict precisely how much cash will come in on any given day.

4. What happens if there's no deal after Oct. 17? If there's no deal, the Treasury Department will be unable to issue any new debt on Oct. 18. That means the nation's credit card is maxed out and all we're left with is the money in our checking account. Former Treasury chief of staff Mark Patterson likens it to "driving with your car on empty about to go into the desert and passing the last gas station intentionally and saying, 'I will take my chances and maybe there will be another gas station on down the road in the desert.'" The government will continue to sell T-bills in the marketplace, essentially "rolling over" (or re-issuing) existing debt that has matured. But the open question is whether investors will choose to reinvest and/or demand higher prices. Those dynamics could expedite a cash shortfall. Default would be imminent and unpredictable. Meanwhile, U.S. and global markets could get spooked; rating agencies could downgrade U.S. credit.

5. What are the biggest bills coming due after Oct. 17?

After Oct. 17, the U.S. has several major scheduled payouts. Without an increase in borrowing authority, the Treasury will have to rely solely on available cash to pay them. At any one of these junctures, or sooner, we could hit default:

-Oct. 23 - $12 billion in Social Security benefits

-Oct. 31 - $6 billion in interest on Treasury securities

-Nov. 1 - $58 billion in Social Security benefits; Medicare reimbursements; military pay/government pensions

6. If the cash runs out, who gets left empty-handed?

On the day a default is upon us, the Obama administration will have to choose, or "prioritize," how to pay the bills with the cash it has on hand. It's widely assumed the U.S. would pay creditors first, since those payments are made on a separate computer system. That would leave some beneficiaries, such as Social Security recipients, at risk of not seeing their checks. However, Treasury could also decide not to pick-and-choose whom to pay and simply wait until it has the cash available to make an entire day's assigned payment all at once, albeit at a later date.

BUZZ

OBAMA: BOEHNER 'CAN'T CONTROL HIS CAUCUS.' President Obama yesterday questioned House Speaker John Boehner's ability to deliver on an agreement, saying he "can't control his caucus," according to ABC's MARY BRUCE. "For Speaker Boehner, for example, him negotiating with me isn't necessarily good for the extreme faction in his caucus. It weakens him," the president told WABC-TV's Diana Williams. "There have been repeated situations where we have agreements. Then he goes back and it turns out that he can't control his caucus. So the challenge here is: can you deliver on agreements that are made? Are you able to come up with sensible bipartisan compromises and deliver on them?" he asked. "The one thing that I've shown is if I say I'm prepared to compromise on something, I can deliver votes and we can get it done." The president was optimistic that a deal to avert default and reopen the government can be reached and urged congressional leaders to "do what's right" and "not do any posturing, let's not try to save face, let's not worry about politics." http://abcn.ws/19FWfmB

TODAY AT THE WHITE HOUSE: President Obama is keeping a low profile, as Senate leaders close in on a deal to avert default and reopen the government. So far, the president has no public events scheduled for today. In the afternoon, he meets separately at the White House with Treasury Secretary Jack Lew and Secretary of State John Kerry.

TOP HOUSE DEMOCRAT WARNS: 'ECONOMY IS ON THE EDGE OF A WATERFALL.' Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, issued an urgent warning Tuesday night about the consequences of a partial government default, declaring: "The economy is on the edge of a waterfall," ABC's JEFF ZELENY reports. "If we cross those deadlines, you have a real risk that you're plunging down very rapidly and the world economy would suffer greatly," Van Hollen told ABC News. "Interest rates would spike, which would hurt all American consumers in fact really hurt the world economy. This is a very clear sign, very big warning sign - don't keep going along this road. Pass a clean debt ceiling and we should reopen the government." The credit rating agency Fitch has put the United States on a "negative ratings watch." While it reaffirmed the AAA credit rating, the agency said that the budget impasse in Congress threatens the full faith and credit of the government. http://abcn.ws/1bV5jJV

-WHAT FITCH SAID: Fitch assigned the blame to Congress, saying lawmakers have not "raised the federal debt ceiling in a timely manner." While the credit rating agency said it believes "the debt ceiling will be raised soon,"the "political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default." The agency did not signal whether it would consider downgrading the country even if Congress reached a last-minute deal, as Standard & Poor's did in 2011.

-CONSERVATIVE GROUPS DOWNPLAY CREDIT RATING WARNING. "The ratings agencies have all said that they will downgrade us if we do not deal with the long-term drivers of our debt," Barney Keller, a spokesman for Club for Growth, according to ABC's JEFF ZELENY, SHUSHANNAH WALSHE and ABBY PHILLIP. "We must stop kicking the can down the road." Dean Clancy, legislative counsel at the Tea Party-allied organization, FreedomWorks, said: "Nobody wants a true default but experts know that going pass x day is not the same as a default. Its only if you go way past x day by many days or weeks that you have the risk of missing some politically sensitive payment like Social Security checks. If you look at the market you haven't seen a big sell off, I think because folks know this, default won't happen. But it certainly can't be encouraging that Washington is playing mumblety-peg with the debt ceiling." A spokesman for another powerful group on the right, Americans for Prosperity, told ABC News that news of the Fitch Warning was "embarrassing." And Sal Russo, the co-founder and chief strategist of Tea Party Express, blamed the Fitch warning on "excessive debt." Russo said he accepts that the "approximate cause" is the current showdown in Congress, but says the "underlining problem is that we have excessive debt and not a plan to get out of it." http://abcn.ws/1bV5jJV

VETERANS HAVE 'A LOT OF ANXIETY' ABOUT LOSING BENEFITS. Audree Morrison, a veteran of the Michigan National Guard, drove all night to be at the National World War II Memorial yesterday to join other veterans and voice her concern about the ongoing federal government shutdown and the impact it could have on her educational and disability benefits, ABC's SHUSHANNAH WALSHE notes. Morrison, who was injured in training, ending up with a broken hip and three pelvis fractures, has been told her benefits could run out later this month if Congress doesn't reopen the government. "It's kind of getting kicked while you're already down, being in the military and if you're already battling, trying to get education benefits, you know it's not always the easiest process, or if you're a disabled soldier like myself too, you wait so long to get everything taken care of and then you finally feel like you get some small victories getting everything taken care of and then when something big like this happens with the shutdown it really feels like you get kicked while you're down even more," Morrison said after a rally at the memorial that drew about 200 people and more than 30 veterans groups. In an interview with ABC News she said there is "a lot of anxiety" among the soldiers she works with. http://abcn.ws/19NBCXv

IN CASE YOU MISSED IT

AFFIRMATIVE ACTION BACK AT THE SUPREME COURT. Michigan's ban on race-conscious admissions policies at public universities seemed to get a favorable reception yesterday from some of the conservatives on the Supreme Court, ABC's ARIANE DE VOGUE writes. Michigan's Solicitor General John J. Bursch defended Proposal 2, a ballot initiative that passed in 2006 with 58 percent of the vote. "The issue in this case is whether a Michigan constitutional provision requiring equal treatment violates equal protection," he said. "The answer is no." At issue in front of the court was not whether racial preferences are a good or bad thing, but whether the people of Michigan "have the choice through the democratic process" to try race-neutral means, he said. The Sixth Circuit Court of Appeals invalidated the ban last year, citing an obscure "political restructuring doctrine" and holding that Proposal 2 placed a special burden on minorities within the governmental process in violation of the Equal Protection Clause. Chief Justice John Roberts and Justice Samuel Alito didn't seem to buy that argument. While Justice Sonia Sotomayor emerged as the most vocal critic of the ban. She said that one of the sponsors said "this constitutional amendment will bring back segregation in Michigan, and it appears to have done just that." http://abcn.ws/H08PoP

WHO'S TWEETING?

@JohnJHarwood: Rs need to consider: what does yesterday say abt credibility to govern? House majority is purer distillation of natl GOP than Mitt ever was.

@mlcalderone: WSJ editorial: "It's time to wrap up this comedy of political errors." http://on.wsj.com/1epgDeA

@ktumulty: Will Obamacare be a success? Brookings says it may depend where you live. http://wapo.st/19FuLNZ via @washingtonpost

@JoeBrettell: A very Happy Birthday to my friend, @amyewalter - a great political pro, but an even better person. Best wishes for an amazing year ahead

@ABCJimKane: Shakespeare put it best: "Default, Dear Brutus, is not in our stars, but in ourselves."