President Barack Obama kicked off high-stakes talks with his Republican foes at the White House Sunday, seeking an elusive deal to stave off a potentially catastrophic US debt default.
Attendees at the crunch meeting included House Speaker John Boehner and Republican Senate leader Mitch McConnell as well as top Democrats, including Senate Majority Leader Harry Reid and former House speaker Nancy Pelosi.
Asked as he went into the talks if the warring politicians would reach a deal in the next 10 days to prevent the US from defaulting on it its debt obligations, Obama replied: "We have to."
Republicans are refusing to raise America's $14.29 trillion debt limit unless Obama first agrees to curb the ballooning budget deficit, in part by cutting costly government-funded social welfare programs.
The president and Democrats say they are willing to make some cuts to the so-called entitlement programs but want the Republicans to meet them half way by allowing tax hikes for millionaires and billionaires to increase revenue.
Before the crucial White House meeting, Boehner and McConnell warned they were abandoning efforts to reach a larger, comprehensive debt reduction deal because Obama and the Democrats insisted on raising taxes on the wealthy.
"Everything they told me and the speaker is that to get a big package would require big tax increases in the middle of an economic situation that?s extraordinarily difficult, with 9.2 percent unemployment. We think it's a terrible idea. It's a job-killer," McConnell told "Fox News Sunday."
The Washington Post reported earlier that negotiators were now left with a less ambitious framework aimed at saving about $2.4 trillion over the next decade.
But, hours before the talks, top Obama aides said the president was standing firm and would continue to seek an overarching debt reduction deal that saves some $4 trillion over the same period.
Both Treasury Secretary Timothy Geithner and Obama's chief-of-staff William Daley clung to the notion a comprehensive deal could still be achieved but offered few clues to how the impasse might be broken.
"It's going to require both sides to compromise," Geithner told NBC's "Meet the Press," adding that Obama would aim for "the biggest deal possible."
Daley, on ABC's "This Week," refused to countenance the idea of a debt default or a smaller deal saying: "Everyone agrees that a number around $4 trillion is the number that will make a serious dent on our deficit.
"It will send a statement to the world that the US has gotten hold of their fiscal problems and they are moving forward."
The talks are part of a final major push to reach a deal to raise the congressionally determined limit on US borrowing, now set at $14.29 trillion, in the face of a budget deficit expected to hit $1.6 trillion this year.
The US hit the ceiling on May 16 but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations.
By August 2, though, the government will have to begin withholding payments to bond holders, civil servants, retirees or government contractors, and the White House has urged a deal by July 22 to have time for Congress to pass it.
Economists warn that if the United States defaults, it could lose its ability to borrow, souring fraught financial relations with creditors like China and sending the already sour global economy into a tailspin.
A default "would certainly jeopardize... not just the stability of the US economy, it would jeopardize the stability at large," new International Monetary Fund chief Christine Lagarde warned earlier Sunday.
But Boehner faces pressure from Republicans close to the archconservative "Tea Party" movement to reject any compromise that raises taxes, something he has already publicly ruled out.
And Obama faces pressure from Democrats outraged he might agree to cuts in the fraying US social safety net, notably to the Medicare health program for the elderly and disabled, and to Social Security retirement benefits.
The discussions are sure to shape Obama's 2012 reelection bid, which will likely turn on voters' assessment of his handling of the economy as it claws its way out of the worst recession since the Great Depression of the 1930s.
On Friday the US Labor Department said the ailing US economy, still digging out from the 2008 global meltdown, had generated a paltry 18,000 jobs in June and the unemployment rate had ticked up to 9.2 percent.