U.S. President Barack Obama on Friday urged lawmakers to avoid economic "Armageddon" and reach a comprehensive deal on spending cuts and tax increases that would avert a potentially ruinous debt default.
But after a week of talks which failed to break the deadlock, Obama signaled he might be ready to sign off on a less ambitious plan backed by Republicans that would not include tax hikes.
"Let's at least avert Armageddon," he told reporters amid growing anxiety not just in the United States but around the world about an Aug. 2 deadline for lawmakers to raise the U.S. government's borrowing limit and avoid default on its $14.3 trillion in public debt.
Lawmakers in both sides of Congress, but particularly Republicans, have linked approval for a rise in the borrowing limit to tough deficit-reduction measures.
They disagree over Obama's preference to include tax hikes for the rich, which conservatives say will only stifle investment at time when unemployment is more than 9 percent.
Federal Reserve chairman Ben Bernanke warned earlier this week that failure to raise the debt ceiling by Aug. 2 could have dreadful repercussions for the fragile U.S. recovery and the global economy.
Moody's and Standard & Poor's ratings agencies also said they had put U.S. debt under review, citing higher risk of default.
"We're obviously running out of time," Obama warned at the White House press conference.
The Wall Street Journal reports that the comments represented a step back from the sweeping plan Obama has been pushing to include tax reform, entitlement cuts and other spending reductions.
It said hopes for a sweeping "grand bargain" deficit-busting package of $4 trillion over 10 years have faded in recent days and the president appeared ready to consider what he called "the least attractive option."
This plan, put forward by Republican Senate Minority Leader Mitch McConnell and Democratic Senate Majority Leader Harry Reid, would link approval on the debt limit increase to spending cuts worth only $1.5 trillion.
The Wall Street Journal said the "likely failure" of Obama's grand bargain sets the stage for a bruising 2012 election season debate about the economy.
Americans will "remember at the polls" who was willing to compromise and who was "locked into ideologically rigid positions" in this debate, Obama said Friday. "Whoever the Republican nominee is, we're going to have a big, serious debate about what we believe is the right way to guide America forward and to win the future. And I'm confident that I will win that debate, because I think that we've got the better approach.''
Politico said Obama put the ongoing deficit debate in "starkly political terms" and cited polls suggesting voters would turn on those who took "ideologically rigid positions."