A Republican deficit reduction plan headed to a close vote in the U.S. Congress Thursday and the White House urged divided lawmakers to clinch a compromise to head off the risk of a debt default by the world's largest economy.
President Barack Obama's priority was to "lift the cloud and make sure that the United States does not default," White House spokesman Jay Carney said, five days before an Aug. 2 deadline for raising the U.S. government's borrowing limit .
Partisan deadlock between Republicans and Democrats over how best to reduce the U.S. deficit, and over what period, has blocked an agreement so far to allow the raising of the $14.3 trillion debt ceiling.
A failure to raise the debt limit by Aug. 2 could trigger a crippling default that would shake the global financial system and could tip the United States back into recession.
While most analysts hope a default will be avoided by an eleventh-hour deal, the risk remains for a damaging downgrade of the United States' top-notch credit rating, a move that would raise U.S. borrowing costs and rattle global investors.
Carney said the debt stalemate had "already had significant negative impact on the economy."
"The American people have made clear they want a compromise," he said. "Our primary objective has to be to protect the economy and the American people from economic harm."
The Republican-controlled House of Representatives has tentatively scheduled a vote Thursday evening on a deficit-cutting plan presented by the top Republican in Congress, House Speaker John Boehner.
Boehner has been cajoling fiscal conservative rebels within his own party to support his bill, which does not deliver the severe spending cuts they demand.
"We don't have the votes yet, but we'll get there," a spokesman for Boehner said.
If the House approves Boehner's plan, the Senate will swiftly vote on, and defeat, that bill, Senate Majority Leader Harry Reid said.
"As soon as the House completes its vote tonight, the Senate will move to take up that bill," Reid said. In the hours before the votes, the White House continued to push for a plan that would win approval from both parties.
Carney said a successful compromise must significantly cut spending, install a mechanism to tackle tax reform and entitlement spending in the future, and lift the debt ceiling through next year.
"We need to start doing things that can pass both houses and be signed into law," he added.
Obama, who is seeking re-election in 2012 and wants to avoid the debt crisis spilling over into the campaign, has threatened to veto the two-step Boehner bill that requires another decision on the debt ceiling next year.
The uncertainty over the U.S. debt talks outcome has been rattling global markets.
But after an initial fall, European shares ended higher Thursday, snapping three consecutive sessions of losses on hopes a solution would be found to the debt crisis in the United States.
U.S. stocks rose Thursday as better-than-expected data on home sales and employment lent support to the market after equities suffered their worst day in eight weeks in the previous session.
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