Top US lawmakers insisted Thursday that the polarised congress would act in time to avert a potentially calamitous early August debt default amid world market worries about prospects for a compromise.
"At the end of the day, we have a responsibility to act," said Republican House Speaker John Boehner, who indicated he had braced his restive majority for the possibility of having to support a potentially difficult deal.
Boehner acknowledged that some Republicans would reject any compromise with President Barack Obama and his Democratic allies, "but I do not believe that would be anywhere close to the majority." But with time running short before an August 2 deadline, Obama must "step up" his efforts to find a solution that closes yawning government budget deficits while raising the $14.3 trillion US debt ceiling, said the speaker.
"It's not enough to wish or to wait for a solution to materialise," said Boehner, who stressed "it would be irresponsible" for Congress and the White House "not to be looking at backup strategies for how to solve this problem."
"We all have an obligation to prevent our country from going into default," said Democratic House leader Nancy Pelosi, who told reporters she and Boehner and their deputies might meet after "constructive" talks on Wednesday. "We're moving in a forward direction," she said.
Pelosi also stressed that "whatever we do has to create jobs" after the US Labour Department reported that new claims for US unemployment insurance benefits climbed sharply last week after two weeks of decline.
Initial jobless claims rose by 10,000 to a seasonally adjusted 418,000 in the week ending July 16, the department said, in the latest sign of weakness in the US economy as it struggles to recover from the 2008 meltdown. Washington hit its debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to pay its bills and continue operating normally, but can only do so until August 2.
Finance and business leaders have warned failure to raise the US debt ceiling by then would send shock waves through the world economy, while Obama has predicted a default would trigger economic "Armageddon." The largest US creditor China has twice warned that Washington must protect investor interests.
With time running short, the US Senate was expected to kill, in a procedural vote on Saturday, a House-passed Republican plan calling for draconian cuts and a balanced budget amendment as the price for a debt ceiling increase.
And lawmakers were discussing a plan crafted by Democratic Senate Majority Leader Harry Reid and Republican Senate Minority Leader Mitch McConnell that would let the president raise the debt ceiling by $2.5 trillion in three increments through 2012 with just Democratic votes. Polls show that US voters are more likely to blame Republicans than Obama for a default and are still reluctant to blame him for sluggish growth and unemployment, still stubbornly high at 9.2 percent.
The crisis spooked Asian markets, which were mixed Thursday on nervousness about the progress of talks aimed at averting a US debt default. Uncertainty also took a toll on the dollar, which slumped Wednesday as markets awaited a resolution to the debt-ceiling stand-off. On Wednesday, White House spokesman Jay Carney said Obama would accept a short-term deal to raise the debt ceiling but only to buy time as part of a broader arrangement to slash the ballooning US deficit.
"We would not support a short-term extension absent an agreement to a larger deal," said Carney, who specified later that he was referring to a stopgap lasting "a few days" if necessary to pass sweeping legislation. The president in the past had rejected short-term measures, insisting on raising the $14.3 trillion US debt limit by enough to avoid another politically painful vote before his November 2012 re-election bid.