US President Barack Obama speaks in a rare prime-time address to the nation.
US President Barack Obama speaks in a rare prime-time address to the nation.Photo: AFP
THE US edged closer to defaulting on its national debt and to losing its prized AAA credit rating as Barack Obama and the top Republican in Congress yesterday put their cases to Americans in duelling prime-time TV appearances.
The President, speaking from the White House, urged a deeply divided Congress to strike a late compromise that would allow America's $US14.3 trillion ($A13.2 trillion) debt ceiling to be raised to avert a default that economists have warned would push interest rates higher, trigger a stockmarket slump and threaten America's economic recovery.
''Because neither party is blameless for the decisions that led to this problem, both parties have a responsibility to solve it,'' Mr Obama told the nation.
He said Americans were ''fed up with a town where compromise has become a dirty word'' in a speech that invoked the memory of Republican Ronald Reagan, during whose presidency the debt ceiling was raised 18 times. Mr Obama said Mr Reagan had taken a ''balanced approach'' to fighting deficits by mixing spending cuts with tax increases.
The Republican House Speaker, John Boehner, followed with his own telecast. He accused Mr Obama of being unwilling to rein in the deficit.
''The sad truth is that the President wanted a blank cheque six months ago, and he wants a blank cheque today,'' Mr Boehner said. ''That is just not going to happen.''
With Washington just a week away from running out of money to pay its bills, congressional support appeared to be coalescing around two competing deficit-reduction plans, although neither had garnered enough support to win easy passage.
Mr Boehner's two-staged plan calls for immediate spending cuts of $US1.2 trillion in return for a $US1 trillion rise in the debt ceiling, to be followed by a similar trade-off in six months with $US1.6 trillion in cuts.
A rival plan drafted by Harry Reid, the leader of the Democrat-controlled Senate, proposes $US2.7 trillion in cuts with a $US2.4 trillion lift in the ceiling to fund the government beyond the 2012 poll.
Mr Obama has threatened to veto any ''short-term fix'' for the debt ceiling. He favours the Reid plan, although his preferred option is a grand deal that would shave $US4 trillion from the deficit through spending cuts and increased revenues derived from ending tax breaks for the rich and big corporations. ''But today, many Republicans in the House refuse to consider this kind of balanced approach. So we're left with a stalemate,'' he said.
Mr Boehner countered: ''The President has often said we need a 'balanced' approach, which in Washington means: we spend more … you pay more.''
Global financial markets have shown a muted response so far, although investor havens such as gold continued to appreciate.
Analysts warn the US could still lose its top-notch credit rating even if a deal is struck before Tuesday's deadline, as both plans being discussed involve deficit reduction far short of what ratings agencies demand.
But the continued sniping suggests a long haul ahead.
Mr Boehner said the Reid plan was ''full of gimmicks'' that did not deal with under-funded programs such as Social Security and Medicare that were ''the biggest drivers'' of US debt.
Senator Reid replied: ''It contains no revenue [increases]. And the amount of the cuts meets the amount of debt ceiling increases. [Republicans] wanted a one-for-one. That's what we've given them.'