Lawmakers were locked in a standoff on Monday over dueling debt plans that offered little prospect for compromise, increasing the threat of a ratings downgrade and national default that could sow chaos in global markets.
Little more than a week before the Aug. 2 deadline to raise the $14.3 trillion debt ceiling, President Barack Obama's Democrats and their Republican rivals pursued separate budget proposals in Congress, with no clear path to bring them together.
The impasse rattled investors worldwide, sending stocks and the dollar down and pushing gold to a record high, but falling far short of the panicky sell-off that some politicians in Washington had feared after weekend talks broke down.
Details emerged of the House of Representatives Republicans' two-stage deficit reduction plan that would start with an initial $1.2 trillion in savings over 10 years. It is sure to be rejected by Obama because it would raise the U.S. debt limit for only a few months, meaning the issue likely would have to be revisited early next year.
Meanwhile, congressional Democrats detailed their competing plan for $2.7 trillion in deficit reduction over the next decade but with a debt limit increase that would carry through the November 2012 presidential and congressional elections. Republicans appear unlikely to support this approach.
Republicans control the House and Democrats control the Senate.
Market players warned of a damaging downgrade of the U.S.'s AAA rating if the stalemate goes down to the wire.
Neither plan being discussed by lawmakers may be enough to avert a downgrade by ratings agency S&P, which has indicated it wants to see a $4 trillion deficit reduction plan over 10 years. The risk of a lower U.S. credit rating has become the markets' main worry.
Joining a growing chorus of global concern as the world's largest economy showed signs of legislative dysfunction, the International Monetary Fund urged swift U.S. action on its debt to avert broad negative fallout.
Obama and congressional leaders have tried to reassure global markets that the country will be able to service its debt and meet other obligations after Aug. 2, when the U.S. will run out of money to pay all of its bills.
Ratings agencies have warned that even if Congress raises the debt ceiling and averts a default, they may still strip the U.S. of its Triple-A credit rating if lawmakers fail to agree on deeper long-term budget cuts.
Republican House Speaker John Boehner's plan would raise the debt limit in stages, forcing Congress to confront the politically painful issue again before the November 2012 election, when Obama is seeking a second term.
Boehner will push for legislation to cut $1.2 trillion in spending over 10 years and provide a short-term, $1 trillion increase in the government's borrowing limit but include no tax increases. Obama has said he opposes a short-term debt limit hike and instead wants about $2.4 trillion in new borrowing authority, which would extend through 2012.
Senate Majority Leader Harry Reid, a Democrat, laid out a $2.7 trillion spending-cut plan that includes large savings from domestic and defense programs to try to break the impasse and would provide enough borrowing authority to meet needs through 2012.
It would include $1.2 trillion in savings that Democrats say Republicans already had agreed to.
"The Republicans are more interested in embarrassing the president than doing what is right for the country," Reid told reporters. "We should not let these extremists dictate the outcome of this debate or the direction of our country. The time for ideological extremism should end."
(Additional reporting by Richard Cowan, Caren Bohan, Alister Bull, Laura MacInnis and Deborah Charles in Washington, Ryan Vlastelica in New York, Emily Kaiser in Singapore, Yoo Choonsik in Seoul; Editing by Will Dunham)