THE US Senate will likely begin consideration this week of a bipartisan fallback plan to avert an unprecedented US default of its debt, Democratic aides said.

The measure is based on a proposal first offered last week by Senate Republican leader Mitch McConnell. Mr McConnell has been negotiating with Senate majority leader Harry Reid on ways to make the proposal more palatable to Democrats.

With time running short, President Barack Obama and lawmakers were struggling for ways to lift the debt ceiling and reduce the deficit as a deadline of August 2nd to prevent a default draws dangerously close.

Mr Obama’s call for a $4 trillion deficit reduction deal hit a brick wall when Republicans in Congress rejected his demand that tax increases on the wealthy be part of the plan.

Aides said supporters expect the Democratic-led Senate to pass the legislation, but it is unclear if the Republican-led House of Representatives would provide its needed concurrence.

As initially proposed by Mr McConnell, the new measure would authorise Mr Obama to raise the debt limit by $2.5 trillion – without any mandatory spending cuts – provided Mr Obama’s fellow Democrats go along with it.

Such a move would spare Republicans from having to back an increase in the US borrowing authority, an unpopular move, yet protect them from being blamed for a default.

Mr Reid wants up to $1.5 trillion in mandatory spending cuts, along the lines of those identified by a deficit-reduction group headed by vice-president Joe Biden.

Staff to Mr McConnell and Mr Reid have also discussed creating a bipartisan committee on long-term deficit reduction, aides said.

Democratic aides said while the Senate will likely begin debate on the measure this week, it is unlikely to come up for a vote on passage until next week. – (Reuters)