“We're obviously running out of time,” Obama warned at the White House, as Democrats and Republicans in the House of Representatives met separately to discuss the way forward and Senate leaders worked on a last-ditch compromise. - File Photo

WASHINGTON: US President Barack Obama pressed polarized lawmakers Friday to avert economic “Armageddon” by quickly forging an elusive deal to prevent an early August debt default with ruinous global consequences.

“We're obviously running out of time,” Obama warned at the White House, as Democrats and Republicans in the House of Representatives met separately to discuss the way forward and Senate leaders worked on a last-ditch compromise.

Obama renewed his preference for a “grand bargain” slicing deep into spending; cutting entitlement programs dear to his fellow Democrats, but Republicans have flatly rejected his call for higher taxes on the rich.

The US president, sure to be judged in the 2012 elections based on his handling of the jobs-poor US economy, signaled he would not reject a last-minute compromise key lawmakers were drafting behind closed doors.

“Let's at least avert Armageddon,” he said after five straight days of crisis talks at the White House failed to reach a deal on closing the yawning budget deficit while raising the US debt limit from its current dollar 14.3 trillion.

Economists and finance and business leaders have warned that failure to raise the US debt ceiling by August 2 could send shock waves through a world economy still reeling from the 2008 collapse.

Ratings agencies Moody's and Standard & Poor's have warned they may downgrade Washington's sterling Triple-A debt rating, and leading US creditor China, Wall Street titan JPMorgan Chase and the Federal Reserve have also sounded the alarm.

With time running short, Obama's top Republican foes in Congress called for votes next week on their plan for severe spending cuts on the way to amending the US Constitution to require cash-strapped Washington to balance its budget.

“Our jobs crisis and national debt require real action. So now the debate will move from a room in the White House to the House and Senate floors,” said Republican Senate Minority Leader Mitch McConnell.

“It's time for the Democrats to get serious as well. We asked the president to lead. We asked him to put forward a plan - not a speech, a real plan - and he hasn't. We will,” said Republican House Speaker John Boehner.

The long-shot Republican plan, all but certain to fail in the Democratic-led Senate, pleased conservative lawmakers close to the “Tea Party” movement that fiercely opposes raising the debt limit and seeks deep spending cuts.

“We're finally backed on offense,” Republican Representative Jeff Flake told reporters.

“If they show me a serious plan, I'm ready to move. Even if it requires some tough decisions on my part,” Obama said at his press conference. “That doesn't seem like a serious plan to me.”

The president left open the door to a “fall-back position” being crafted by McConnell and Democratic Senate Majority Leader Harry Reid that would pair spending cuts with a debt limit increase, but called it the “least attractive option” apart from default.

That measure, described by aides who warned it was still in flux, would include some dollar 1.5 trillion in spending cuts but would essentially let Obama raise the debt ceiling with only Democratic support in both chambers.

The proposal, which has incensed conservatives, could also create a commission of US lawmakers to recommend cuts that would circumvent parliamentary hurdles more easily than regular legislation.

Obama assailed the Republican refusal to support his call for raising taxes on the rich and wealthy corporations, warning a default would amount to “a tax increase on everybody” in the form of skyrocketing interest rates.

Republicans have argued that tax hikes would smother investment that feeds job growth at a time when the US economy faces stubbornly high unemployment of 9.2 per cent.

The US Treasury meanwhile Friday said it would stop reinvesting its exchange stabilization fund into US debt as a “final” step to sustain the US government's spending and borrowing power through August 2.

The Treasury said in a statement that it would use its “final extraordinary measure to extend US borrowing authority” until that deadline.

A new opinion poll by Quinnipiac University found the US public more ready to blame Republicans than Obama by a 48 per cent to 34 per cent margin in the event of a default.

The president cast the 2012 campaign as a national argument over the US economy, and predicted “I will win that debate because I think that we've got the better approach.”

Washington hit its debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally, but can only do so until August 2.