White House budget director Jack Lew said on Sunday there was still time to clinch a major deficit reduction deal and he was confident that congressional leaders know a US debt default is not an option.
With time running short, President Barack Obama and lawmakers were struggling for ways to lift the debt ceiling and reduce the deficit as an Aug. 2 deadline to prevent a default draws dangerously close.
"I think it's not insignificant that all the leaders understand it would be irresponsible to get to August 2 and not extend the ability of the United States to pay its obligations," Lew said on CNN's "State of the Union" program.
Lew, appearing on the Sunday morning talk shows to push Obama's case for a sweeping deficit reduction deal along with the debt ceiling increase, told NBC's "Meet the Press" program: "There's still time to get something big done. The president has made it clear he wants to do something substantial."
Obama's call for a $4 trillion deficit reduction deal snagged when Republicans in Congress rejected his demand that tax increases on the wealthy be part of the plan.
Congress must raise the $14.3 trillion limit on US borrowing by Aug. 2 or the government will run out of money to pay its bills, causing turmoil in global financial markets and potentially forcing the United States into another recession.
Lew told CNN there has been "activity and progress" in talks among Senate leaders "to make sure that at a minimum Congress has a way to take action and avoid default on the US debt" through a plan offered by Senate Republican leader Mitch McConnell that would clear the way for Democrats to raise the debt ceiling without Republican help. After meeting congressional leaders on Thursday at the White House, Obama had said he wanted to hear from them by the weekend about a way forward in the stalled debt talks, but Saturday passed without an announcement of a new White House meeting.
Republicans demanded a deficit-cutting deal in order to support raising the debt limit, but they disagree with Democrats on how to do it. The White House wants some tax increases on wealthier Americans to be part of a package but Republicans reject that. Prospects for a quick deal appear slim. Officials said Obama, Vice President Joe Biden and other staff discussed "various options" with lawmakers and other staff on Saturday but no significant progress was reported.
McConnell's backup plan, which has been cautiously embraced by Senate Democratic Leader Harry Reid, may be the solution all sides can accept if a big deal cannot be reached.
The plan could include about $1.5 trillion in spending cuts and set up a panel to find further savings. The Senate could vote on it late next week, but it remains unpopular with House Republicans. State governors, fearing the effects of the debt talks on their own credit ratings, pressured Washington to get a deal.
"This is a dangerous and equally ridiculous situation that's playing itself out," Connecticut Governor Dannel Malloy, a Democrat, told Reuters at a National Governors Association meeting in Salt Lake City. "It takes one sentence to solve this problem - and that's to lift the debt ceiling."
"It would be an embarrassment for the United States of America to default on its obligations," said Virginia Governor Bob McDonnell, a Republican. Experts say it would be much more than an embarrassment.
Ratings agencies Moody's and Standard & Poor's have signalled they may cut the gold-plated US credit rating if the borrowing limit is not raised and deficit-reduction measures are not laid out.