Obama 'far apart' from Republicans on debt deal

"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.

The president told reporters that the two sides were "frank" and "discussed the various options available to us" to forge an accord on raising the US debt limit while closing the yawning 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," said Obama.

The high-stakes summit came as new data showed the US private sector had served up a burst of hiring in June, and that jobless claims fell slightly but remained high in fresh evidence of a wobbly recovery from the 2008 meltdown.

Obama and independent economists have warned that failing to raise the debt ceiling will trigger a default on US debt payments, sending global economic shockwaves that risk hurling the world into a painful new recession.

The talks are part of a final major push to reach a deal to raise the congressionally determined limit on US borrowing, now set at $14.29 trillion, in the face of a budget deficit expected to hit $1.6 trillion this year.

The US 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.

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.

The White House signaled Wednesday that it would favor slashing some $4 trillion in spending over 10 years as part of a grand bargain that could push the next debt ceiling vote until after the 2012 presidential elections.

And Obama himself has hinted that he could accept cuts to key social safety net programs like the Social Security retirement plan and the Medicare health insurance for the elderly and disabled, according to US media reporters.

Republicans, led by House Speaker John Boehner, have forcefully rejected a concerted Democratic push to raise taxes, notably on the richest earners and wealthy companies, charging his would smother job creation.

"We're not going to raise taxes on the very people that we expect to reinvest in our economy and to help grow jobs," Boehner said on Thursday before the talks.

But he also suggested that his party could embrace a wholesale overhaul of the US tax code -- a step both sides have favored but that Republicans had said should be done apart from the ongoing debt ceiling discussions.

Both sides face a likely political challenge from rank-and-file lawmakers unlikely to embrace legislation to enact any final deal, and some officials have started to hint at the need for a short-term extension absent a breakthrough.

"Everybody acknowledged there's going to be pain involved politically on all sides, but our biggest obligation is to make sure that we're doing the right thing by the American people," Obama said after the talks.

Boehner faces members of the archconservative "Tea Party" movement who have refused to back a debt ceiling increase no matter what -- shrugging off prospects of a first-ever US default that could plunge the world economy back into recession.

Obama faces core Democrats fiercely opposed to cutting anti-poverty programs and investment in science and education and fearful that the president's drive for reelection next year will lead him to abandon them to reach for the center.

"We are not going to balance the budget on the backs of America's seniors, women and people with disabilities," said Democratic House Minority Leader Nancy Pelosi.

Raising the debt ceiling has always been fraught with angry political rhetoric -- Obama himself opposed such a move in 2006, calling it a "failure of leadership -- but it has also largely been done as a matter of routine.