President Barack Obama will decide on Saturday whether to summon lawmakers for a new round of debt and deficit talks, weighing the chances of progress as both sides stick to their positions on spending and taxes.
Congress must raise the $14.3 trillion limit on borrowing by August 2 or the government will run out of money to pay its bills, causing turmoil in global financial markets and potentially forcing the United States into another recession.
Congressional leaders met with fellow lawmakers on Friday to gauge support for a deal, but movement appeared limited.
Republicans want a deficit-cutting deal in order to raise the debt limit, but they disagree with Democrats on how to do it. The White House wants some tax increases on wealthy Americans to be part of a package; Republicans reject that.
The truth is, you can't solve our deficit without cutting spending, Obama said in his weekly radio and Internet address on Saturday.
But you also can't solve it without asking the wealthiest Americans to pay their fair share -- or without taking on loopholes that give special interests and big corporations tax breaks that middle-class Americans don't get.
Republicans in the House of Representatives said they would vote next Tuesday on a bill to raise the debt ceiling by the $2.4 trillion Obama has requested as long as Congress adopted a balanced budget amendment -- an unlikely prospect.
Republican Senator Orrin Hatch, who has introduced such a measure in the Senate, said it would help rein in spending.
Only by restoring constitutional restraints on the ability of Congress to spend, can we constrain the growth of the federal government, he said in the weekly Republican address.
The solution to a spending crisis is not tax increases. Yet, Washington has consistently demonstrated that it cannot control its urge to spend.
As the two sides bicker, the consequences of not reaching a debt deal are looming. Ratings agencies Moody's and Standard & Poor's have signaled they may cut the gold-plated U.S. credit rating if the borrowing limit is not raised and deficit-reduction measures are not laid out.
BACK TO THE TABLE?
The White House and congressional leaders have tried to reassure markets that the United States would not default on its debt.
A backup plan put forward by Senate Republican Leader Mitch McConnell may be the solution all sides embrace if a big deal cannot be reached.
McConnell's plan would establish a legal framework to raise the debt limit and put nearly all the burden on Obama to carry it out. Senate Democrats are working to modify the plan, but it remains unpopular with conservatives.
On Thursday evening Obama gave lawmakers 24-36 hours to get back to him with proof of a plan to go forward. He could call for further talks on Saturday or Sunday if needed.
The president spelled out the consequences of default in a news conference on Friday.
We could end up with a situation, for example, where interest rates rise for everybody all throughout the country, effectively a tax increase on everybody, he said.
Whether you're using your credit or you're trying to get a loan for a car or a student loan, businesses that are trying to make payroll, all of them could end up being impacted as a consequence of a default.
Republican House of Representatives Speaker John Boehner said Obama had to embrace real spending cuts.
The White House must step up and embrace real spending reforms and cuts that will show job creators America is finally serious about addressing the debt, he said in a statement after Obama's press conference.
Democrats and Republicans must lock arms together in the days ahead and take real action to stop the spending binge that has put our nation in economic jeopardy.
(Additional reporting by Andy Sullivan and Steve Holland; Editing by Paul Simao)