U.S. congressional leaders appeared to ignore a plea from President Barack Obama Friday to seize a "unique opportunity" to stabilize the American economy for decades, and embarked on rival fallback plans as a critical Aug. 2 deadline for avoiding a first-ever default neared.
Congressional leaders gave up on negotiations with White House officials on a sweeping deficit-reduction package and instead tried to broker agreement on at least two proposals.
One was a House version given little chance of success, even by some supporters, and the other was a bipartisan Senate approach holding out more promise.
House Republicans later Friday announced plans to vote next week on legislation to raise the $14.3-trillion debt limit automatically if Congress approves a balanced-budget constitutional amendment. Senate approval of that amendment seemed extremely unlikely in a vote set for the next few days.
At the same time, Senate leaders from both parties worked on their own measure that would allow Obama to raise the debt limit without a prior vote by legislators. That plan was likely to include limits on spending across thousands of government programs, and possibly a down payment on cuts, as well.
As part of that proposal, a panel of legislators would recommend cuts in benefits programs by the end of the year, with the House and Senate required to vote yes or no on the package without possibility of changes.
"Now the debate will move from a room in the White House to the House and Senate floors," said Senate Republican leader Mitch McConnell, indicating that the daily closed-door negotiations at the White House over the previous five days were a thing of the past.
Earlier Friday, Obama said triggering a default would effectively mean "a tax increase for everybody," sending interest rates higher and likely sparking a global financial crisis.
"Congress has run up the credit card and we now have an obligation to pay our bills," he said in his second news conference in a week to pressure the Republican-led U.S. House of Representatives to come to an agreement about raising the U.S. debt ceiling.
But Obama said legislators shouldn't be getting this close to the date to raise the debt ceiling without an agreement.
The president said he still wanted to strike a big deal that would raise the debt limit as well as cut spending and raise revenues.
Obama said the country should save trillions of dollars even with a balanced approach, a reference to a deal that would combine both spending cuts and tax increases on more well-off Americans.
"We have a unique opportunity to do something big," he said.
Obama said he was ready to make tough decisions — such as on Medicare costs — and challenged Republicans to do the same.
He attempted to turn the Republicans' opposition to any tax increases back against them, warning starkly that failure to raise the debt ceiling would mean "effectively a tax increase for everybody" if the government defaults, sending up interest rates.
Still, Obama said that "it's hard to do a big package" in deadlocked Washington, acknowledging Republicans are opposed to any new tax revenue as part of a deficit-cutting deal.
"If they show me a serious plan, I'm ready to move," he said.
Obama did not schedule more talks Friday but asked congressional leaders to get a reading from their caucuses on where to go next and to report back to him in 24 to 36 hours.
White House officials said a meeting could still be scheduled this weekend.
Pressure for a solution was mounting, however, with dire warnings from Federal Reserve Chairman Ben Bernanke, red flags from credit rating agencies and pressure from the business and financial sectors.
Credit rating agency Standard & Poor's said on Thursday that there is a 50 per cent chance it will downgrade the U.S. government's credit rating within three months because of the congressional impasse over approving an increase in the debt ceiling. The rating agency said it is placing the United States on a credit watch.
The S&P action marked the second credit warning in the past two days. On Wednesday, Moody's Investors Service said it is reviewing the government's triple-A bond rating.
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