WASHINGTON — President Barack Obama has invited Congressional leaders to White House talks on Thursday to try to reach a budget deal within two weeks that reduces the US deficit and raises the debt limit.

"I've asked leaders of both parties and both houses of Congress to come here to the White House on Thursday so we can build on the work that's already been done and drive towards a final agreement," Obama told reporters Tuesday.

White House spokesman Jay Carney said afterwards that all the Congressional leaders who were invited had accepted the invitation.

"We've made progress and I believe that greater progress is within sight, but I don't want to fool anybody," Obama added. "We still have to work through some real differences."

The US ran into its $14.29 trillion debt 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.

But by August 2, the government will have to begin withholding payments -- to bond holders, civil servants, retirees or government contractors -- if lawmakers do not raise the ceiling.

"We need to come together over the next two weeks to reach a deal that reduces the deficit and upholds the full faith and credit of the United States government and the credit of the American people," Obama said.

He added that spending cuts in domestic, defense and entitlement programs as well as loopholes and breaks in the tax code for the wealthiest Americans are all on the table.

"It's my hope that everybody's going to leave their ultimatums at the door."

Republican leaders have rejected any tax increases as part of a final deal to raise the debt ceiling in the face of a US budget deficit expected to hit $1.6 trillion this year.

"We're not dealing just with talking points about corporate jets or other ?loopholes.' The legislation the president has asked for, which would increase taxes on small businesses and destroy more American jobs, cannot pass the House," said Republican House Leader John Boehner in an official response to Obama's Tuesday remarks.

Under pressure from Obama and his Republican foes, the Democratic-led Senate scrapped its cherished week-long break for the July 4 Independence Day holiday in a bid to make progress in the seemingly stalled negotiations.

The two sides have traded public broadsides amid private negotiations on a package to trim the deficit while raising cash-strapped Washington's ability to borrow, averting a possible default that could trigger a fresh recession.