US President Barack Obama urged Democrats and Republicans Saturday to take a "balanced approach" to deficit reduction ahead of a new round of key talks aimed at avoiding America's default on its debt.

"I believe we need a balanced approach," Obama said in his weekly radio address. "That means taking on spending in our domestic programs and our defense programs."

The president said the two parties must address challenges like the solvency of Medicare, a government-run health insurance program for the senior. He also insisted on closing tax loopholes and deductions for the wealthiest Americans.

Obama acknowledged that "real differences in approach" continued to divide Democrats and Republicans. But he expressed confidence the two sides will be able to find a solution to this difficult problem.

"The good news is, we agree on some of the big things," Obama pointed out. We agree that after a decade of racking up deficits and debt, we finally need to get our fiscal house in order. We agree that to do that, both sides are going to have to step outside their comfort zones and make some political sacrifices. And we agree that we simply cannot afford to default on our national obligations for the first time in our history; that we need to uphold the full faith and credit of the United States of America."

The US government reached its debt limit of $14.29 trillion in May and since then the Treasury Department has used special measures to allow the government to keep paying its bills.

But unless the limit is raised by August 2, the Treasury says, growing spending and debt service commitments will force a default, which would have disastrous ripple effects throughout the global financial system.

By August 2, 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 to pass it.

However, Republicans in Congress -- which sets the debt cap into law -- have refused to raise it unless the move is accompanied by deep spending cuts, and their talks with Democrats have made little visible progress.

The president was due to hold a fresh round of negotiations at the White House around dinnertime Sunday with top Republicans, including House Speaker John Boehner, in a bid to find a path to a debt-limit deal.

Obama said that with the US economy still suffering the effects of the past recession, the country could not afford what he described as "the usual partisan game-playing in Washington."

By getting the US fiscal house in order, he argued, Congress will be in a stronger position to focus on important job-creating measures.

"I know we can do this," the presented said. "We can meet our fiscal challenge. That?s what the American people sent us here to do. They did not send us here to kick our problems down the road .... They sent us here to work together. They sent us here to get things done."

However, Boehner, the Republican speaker, played down talk that Republicans, the White House, and Obama's Democratic allies were closing in on a compromise that could slash up to $4.5 trillion over 10 years in savings in return for raising the debt ceiling.

"There is no agreement, in private or in public," he said. "There are serious disagreements about how to deal with this very serious problem."

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.