US Republican leaders scrambled to rescue their budget deficit-cutting plan late on Friday after conservatives mounted a rebellion that heaped uncertainty on efforts to avert a catastrophic debt default.
House of Representatives speaker John Boehner’s failure to round up enough support for his plan on Thursday exposed a rift in the Republican Party that is hampering efforts to reach a compromise to raise the US debt ceiling before a Tuesday deadline.
Boehner’s plan include spending cut by about $900 billion and raise the debt ceiling for a few months.
President Barack Obama said that unless Democrats and Republicans strike a deal, the government will start being unable to pay its bills on August 2.
With only four full days left, the Treasury is likely to unveil an emergency plan explaining how the government would function and pay its obligations if Congress does not agree to raise its borrowing limit from $14.3 trillion.
Global stock markets fell after lawmakers put off the vote and oil dropped below $97 a barrel.
In another sign of growing global alarm over the US impasse, China’s state-run news agency said that the world’s largest economy has been “kidnapped” by “dangerously irresponsible” politics.
As the largest foreign creditor to the US, Beijing has repeatedly urged Washington to protect its dollar investments, which are estimated to account for about 70% of its $3.2 trillion in foreign exchange reserves.
Meanwhile, the CEO of Wal-Mart Stores Inc and other major US employers have told the Congress that they would be willing to give up tax breaks that benefit their companies in return for a steep drop in the country’s 35% corporate tax rate.
Some US firms are also hitting the pause button on deals as debate turns into cliffhanger.