U.S. President Barack Obama and key lawmakers fail to agree on how to slash debt

U.S. President Barack Obama and key lawmakers have failed to reach agreement on how to slash the nation’s debt and avoid a possible economic meltdown.

Without raising the limit, the U.S. could default on some of its loans. U.S. Treasury officials have repeatedly warned that would have “catastrophic” consequences for the economy, Voice of America News.com reported.

U.S. President Barack Obama warned after talks with his Republican foes that both sides stood "far apart" on how to avert an early August debt default and called for renewed "hard bargaining" on Sunday with Congressional leaders.

White House and congressional aides have said Obama would propose doubling the amount of money trimmed from the country’s budget deficit to $4 trillion.

"We'll hopefully be in a position to then start engaging in the hard bargaining that's necessary to get a deal done," Obama said after hosting Senate and House of Representatives leaders at the White House, AFP reported.

Obama said both sides were "frank" and "discussed the various options available to us"  for an accord on raising the U.S. debt limit while closing the increasing government deficit.

But he added, "I want to emphasize that nothing is agreed to until everything's agreed to, and the parties are still far apart on a wide range of issues," despite agreeing that the United States cannot default.

"I will reconvene congressional leaders here on Sunday, with the expectation that at that point the parties will at least know where each other's bottom lines are," he said.

Obama and independent economists have warned that if the debt ceiling is not raised it will trigger a default on U.S. debt payments and risk bringing the world into a new recession.

The talks are part of a final major push to reach a deal to raise the congressionally determined limit on U.S. borrowing, now set at $US14.29 trillion, in the face of a budget deficit expected to hit $US1.6 trillion this year, AFP reported.

The U.S. hit the ceiling on May 16, but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations, it reported.

But by August 2, the government will have to begin withholding payments – to bond holders, civil servants, retirees or government contractors – and the White House has urged a deal by July 22 to have time to pass it.