With four days remaining until the United States hits its debt limit, President Barack Obama on Friday told deeply divided Republicans and Democrats to stop bickering and find a way "out of this mess."
Obama said a deficit-reduction plan being advanced by the top Republican in Congress would be defeated in the Senate and was simply wasting time. He called for compromise and said both parties were not that far apart on spending cuts.
"There are plenty of ways out of this mess but we are almost out of time," he said, warning that the country's top-notch triple-A credit was at risk.
The United States will be unable to borrow money to pay its bills if Congress does not raise the debt limit by August 2. That could result in an unprecedented default that could push the already fragile economy back into recession.
Fears about the health of America's economy multiplied after a government report showed weaker-than-expected growth in the second quarter, raising the risk of recession.
Obama spoke as Republican leaders rushed to retool their debt plan with changes that can win enough rebellious conservatives to pass the House of Representatives. That hurdle must be cleared before work on a compromise with Democrats is started in earnest, lawmakers and the White House say.
World leaders have been stunned by the dysfunction in Washington that has led the United States to the brink of default. World Bank President Robert Zoellick on Friday said the United States was playing with fire.
America's largest foreign creditor, China, has repeatedly urged Washington to protect its dollar investments and its state-run news agency on Friday said the United States had been "kidnapped" by "dangerously irresponsible" politics.
With time running out to avert an unprecedented default, Obama called on the American people to intervene directly by calling, emailing or posting messages on Twitter to their lawmakers.
Within minutes, telephone circuits in the House were overwhelmed by a high volume of external calls, resulting in busy signals or difficulty getting through on phone lines, House aides said.
The president's call for compromise and Republican efforts to win over their most conservative members temporarily soothed rattled financial markets.
The U.S. dollar trimmed some of its losses after plunging to all-time lows against the safe haven Swiss franc due to debt worries and poor economic growth. U.S. stock prices, which had fallen for a fifth straight day, regained some momentum after Obama's late-morning comments.
HURDLE TO COMPROMISE
House Speaker John Boehner's failure to round up enough support for his bill on Thursday exposed a rift in the Republican Party that was complicating efforts to reach a compromise to raise the debt ceiling before Tuesday's deadline.
His new plan includes tougher requirements on Congress to pass a balanced budget amendment to the Constitution, a long-time core demand of conservative Republicans who say it is the only way to control Washington spending. While the measure may pass the Republican-controlled House, it is expected to be rejected by the Democratic-led Senate.
At that point, efforts shift to reaching a compromise, and for Boehner, that could mean drafting a deal that can win enough votes from Democrats in the House to offset the inevitable loss of support from Tea Party-affiliated Republicans.
Senate Majority Leader Harry Reid, a Democrat, warned that the country could not wait any longer and he vowed to take steps to move legislation in the Senate.
Reid also called on Senate Republican leader Mitch McConnell to immediately work with him on a compromise bill that could be enacted before the August 2 deadline.
The U.S. Treasury has said it will unveil an emergency plan explaining how the government would function and pay its obligations if Congress does not agree to raise its borrowing limit beyond $14.3 trillion. But that announcement will not come until at least after markets close on Friday.
Treasury and Federal Reserve officials were to meet on Friday with traders and analysts from the 20 Wall Street firms that directly deal U.S. debt, in a hastily expanded gathering that will focus on upcoming sales of government debt.