The US Congress remained dangerously split today in the face of an unprecedented American default on its debt in just six days, as Republicans clashed with Democrats - and with each other - over raising the federal cap on borrowing.
Deeply divided Republican and Democratic leaders are scrambling to find common ground before August 2nd, when the US government is expected to hit its $14.3 trillion (€9.9 trillion) borrowing limit that could trigger a default and cause chaos on world markets.
Even if that fate is avoided, a budget plan that flinches from hefty cuts in the deficit could result in a downgrade of the top-notch US credit rating, raising borrowing costs and dealing a severe blow to the country's weak economic recovery.
The US Treasury said this evening the government will no longer be able to borrow funds on August 2nd and warned there was no way to guarantee the country would be able to pay all its bills if Congress did not raise the debt cap.
Treasury said tax receipts were in line with expectations after Wall Street analysts suggested that stronger-than-expected tax income meant that the United States would not default on its obligations until mid-August.
"Tax receipts were as expected for June and July. The fact remains that the US will exhaust borrowing authority on August 2 and after that date there is no way to guarantee we will be able to meet all of the nation's obligations," a Treasury spokeswoman said in a statement.
However, she did not specify a date for when the government would actually start to miss payments on its debt or other bills.
The prospect of a quick resolution suffered another setback when a vote on a deficit reduction plan offered by House of Representatives Speaker John Boehner, the top Republican in Congress, was pushed back to tomorrow from today amid opposition by fellow Republicans as well as Democrats.
Republicans control the House and Barack Obama's Democrats control the Senate.
A competing plan crafted by Senate Majority Leader Harry Reid, a Democrat, also faced a setback today when the non-partisan Congressional Budget Office said the proposal would cut $2.2 trillion from deficits, about $500 billion less than Democrats had claimed.
Mr Boehner rushed to rework his proposal after a Congressional Budget Office analysis yesterday found it would cut spending by $350 billion less than the $1.2 trillion over 10 years he had claimed.
Lawmakers need to carve out a deficit reduction plan to clear the way for Congress to raise the borrowing limit. But complications surrounding the rival proposals could mean efforts to forge a compromise will go right down to the wire.
In an interview on MSNBC, Democrat Representative Steny Hoyer promoted Mr Reid's proposal as a solution to the deadlock, saying it reflects what Mr Boehner wants – namely "no new revenues, no new taxes, cuts equal to the extension of the debt limit."
After weeks of acrimonious debate, the contours of a possible deal have emerged but Republicans and Democrats are digging their heels in on some key demands and blaming each other for putting politics ahead of the national interest.
Mr Obama has threatened to veto the Boehner plan if it wins congressional passage. Mr Reid described it as "dead on arrival."
The plan has also failed to win the backing of Republicans aligned with the conservative Tea Party movement. They have refused to back tax hikes and want deeper cuts to social programs traditionally protected by the Democrats.
The White House said last night it was working with Congress to craft an unspecified "Plan B," providing a glimmer of hope that an 11th-hour deal could be reached.
Americans also are overwhelmingly concerned about the crisis, a Reuters/Ipsos poll showed. Some 56 per cent support a mixture of tax increases and spending cuts that Obama has advocated and Republicans have dismissed.
All three big credit-rating agencies have warned the United States needs to come up with a credible deficit plan to keep its top AAA rating in the long term.
The gridlock dragged global stocks down today, particularly in Europe, and major US stock exchanges opened lower by at least 1 per cent in early trading.
Worried investors shifted funds into traditional safe havens gold and the Swiss franc, which both rose to record highs in dollar terms. The cost of insuring against a US debt default in the next year increased to a record high.
Still, there have been no signs of panic in markets because most investors expect a deal to be struck by the deadline.
"The market is expecting both sides to take it to the edge, to push it as long as possible given the politics and given the cost to any side which backs down and loses one of its core interests too early on," said Stephen Green, head of research for Greater China at Standard Chartered Bank.
However, the bank's Chinese clients take a more pessimistic view on America's longer-term fiscal health, Mr Green said."Many of them look at the politics in the US and see that it's so dysfunctional that they're losing hope that the US can actually get its fiscal house in order," he said.
France's budget minister, Valerie Pecresse, urged Washington to come to an agreement. "The global economy needs an American agreement," the minister said.