WASHINGTON Scolded by President Barack Obama, Congress scrambled on Saturday to produce a deficit plan within 48 hours that keeps the United States from a catastrophic debt default now days away.
A day after talks collapsed in acrimony, Obama held an emergency meeting with congressional leaders at the White House and told them to find areas of agreement.
Their goal: Seal a deficit-reduction package of spending cuts and perhaps tax increases that will allow a vote by the August 2 deadline to raise the debt ceiling beyond $14.3 trillion and avoid economic calamity.
A Republican leadership aide said lawmakers are working on a plan for $3 trillion to $4 trillion in savings over 10 years, but another high-ranking Republican official said no numbers had been settled. Republican leaders want "to show progress" by 4 p.m. EDT on Sunday, the aide said.
It was unclear whether Republicans would agree to steps to raise tax revenue to help reduce the deficit, an Obama demand that has been the key sticking point to a deal.
Underscoring the threat facing America's credit rating and standing in the financial markets, House of Representatives Speaker John Boehner told fellow Republicans that leaders hope to show signs of progress by Sunday afternoon, to avoid spooking Asian financial markets opening at that time.
"I am concerned that there might be an adverse reaction in the markets," Republican Representative Charles Dent said in a telephone interview with Reuters after the call.
Dent said Boehner told members a default was not an option and lawmakers have to come to agreement.
"We need to have something posted online by Monday," a Republican congressional aide said.
Congressional leaders huddled in Boehner's office in the early evening on Saturday for an hour.
Republicans were proposing behind closed doors a deal with two installments of debt limit increase and deficit reduction. Democrats said they only wanted one that would extend the debt limit through the 2012 election year, a Democratic aide said.
Saturday's White House emergency meeting lasted a bare 50 minutes, a day after Obama complained that Boehner had left him at the altar and refused to return his phone call.
The mood around the table in the White House Cabinet Room appeared strained.
In the talks, Obama warned lawmakers not to pursue a short-term extension of the $14.3 trillion U.S. debt limit, as some want. He wants an extension that would allow for U.S. borrowing to pay its bills through 2012, when he and most lawmakers are up for re-election.
"Congress should refrain from playing reckless political games with our economy. Instead, it should be responsible and do its job, avoiding default and cutting the deficit," White House spokesman Jay Carney said after the talks.
A short-term extension of mere months could cause Wall Street credit agencies to strip America of its gold-plated triple-A rating and increase interest rates for American consumers, Obama told them.
Boehner, the top U.S. Republican, promised that Congress this weekend "will forge a responsible path forward" and that House and Senate leaders will work to find a bipartisan solution to "significantly reduce Washington spending and preserve the full faith and credit of the United States."
Senate Republican leader Mitch McConnell said congressional leaders were working on new legislation that will "prevent default while substantially reducing Washington spending."
A senior Republican aide said a fallback option initially presented by McConnell would not be the basis of the new bill. New legislation would be aimed at cutting spending, preventing default and not raising taxes, the aide said.
WINDOW QUICKLY CLOSING
With the world's biggest economy set to run out of money to pay all of its bills on August 2, the window was closing fast for a "grand bargain" of spending cuts and tax increases in exchange for Congress raising the debt ceiling.
The fits and starts in the negotiations have left both sides fuming. Obama has said he has agreed to deep spending cuts in social programs that make his own Democrats uneasy but that Republicans must allow some taxes to rise, a prospect they have rejected.
Financial markets are growing more edgy and U.S. banks and businesses are making contingency plans for the possibility of a debt default that would drive up interest rates, sink the dollar and ripple through economies around the world.
Credit rating agencies want spending restraints for the United States to keep its prized Triple-A rating, which makes U.S. Treasuries the solid foundation for global investors and lowers borrowing costs for state governments, businesses, homeowners and consumers.
Both Republicans and Democrats chafed at the compromises a far-reaching deal would require before the presidential and congressional elections in November 2012, with each side accusing the other of not doing enough and demanding too much.
Closed-door talks last week between Obama and Boehner collapsed Friday largely over how much revenue would be raised through tax reform -- with Obama wanting $1.2 trillion over 10 years and Boehner putting $800 billion on the table.
Boehner has to overcome resistance from Tea Party movement conservatives in his own party and could run into problems for having signaled a willingness to give ground on revenue increases in closed-door talks at the White House.
"If not reversed within the next few days through crisis negotiations, this breakdown will be highly detrimental to the already fragile health of both the U.S. and global economies," Mohamed El-Erian, co-chief investment officer at Pimco, the world's top bond fund manager, told Reuters.
(Additional reporting by Laura MacInnis, Matt Spetalnick, Andy Sullivan and Donna Smith; Writing by Steve Holland; Editing by Eric Walsh and Todd Eastham)