|Obama has held talks with Republican Congress members to reach consensus on budget deficit talks [AFP]
US President Barack Obama has wrapped up a fifth day of talks to strike a deficit reduction deal and clear the way for a debt limit raise in order to avoid default by the government.
Obama urged Congressional leaders on Thursday to go back to their party members to gauge support for a number of elements in a plan to address the nation's debt.
Congress must approve a deal so the government can borrow another $2.4 trillion by August 2 to pay its bills. Obama administration officials have already raised concerns about the consequences of the default on the US economy.
Obama's Republican opponents want steep spending cuts in return for supporting an increase in the $14.3 trillion borrowing limit.
Standard & Poor's decision to move the US's top-tier credit rating closer to downgrade underscored the need for Congress to both raise the debt limit and agree a deal to cut deficits, Jeffrey Goldstein, the US Treasury's under-secretary for domestic finance, said on Thursday.
"Today's action by S&P restates what the Obama administration has said for some time: that Congress must act expeditiously to avoid defaulting on the country's obligations and to enact a credible deficit reduction plan that commands bipartisan support," Goldstein said.
S&P earlier put the US credit rating at Credit Watch-Negative, saying there was a 50-50 chance of a downgrade in the next 90 days due to the difficult political situation in Washington.
US Treasury Secretary Timothy Geithner told Senate Democrats that time wqw running out to avoid a credit default and said it was time the US sent a "definitive signal" that it would start tackling its long-term debt problems.
US Federal Reserve Chairman Ben Bernanke told a a Senate panel that a default would be a "calamitous outcome" that "would create a very severe financial shock" to the US and global economies.
China, the US's biggest foreign creditor with more than $1 trillion in US debt, has also urged Washington to adopt responsible policies to protect investor interests.
The deal that Obama wants - a $4 trillion, 10-year deficit-reduction proposal - would eventually increase taxes, reform social entitlement programmes such as Medicare and Medicaid and cut government spending.
Republicans have balked at the idea of raising taxes on the highest earners and wealthy corporations as part of any plan to slice deep into government spending, saying that doing so would smother job growth.
Eric Cantor, Republican Congressman, said: "Central to discussions we’ve been having on the debt ceiling increase is how are we going to ensure we’re actually changing the system in Washington? That we're actually going to change the way we spend taxpayer money?"
Obama told Republicans at the conclusion of a meeting on Wednesday that he would not yield further even if it puts his presidency at risk, a Republican aide has said.
"Enough's enough," Obama said, according to a Democratic official familiar with the talks.