The Democratic-led US Senate late on Friday voted to set aside a House-passed Republican bill to avert a potential ruinous debt default, setting the stage for weekend talks on forging a compromise plan.
Lawmakers voted 59-41 against Republican House Speaker John Boehner's measure to raise the US debt ceiling in two stages to enable allow Washington to pay its bills past a Tuesday deadline.
Democratic Senate Majority leader Harry Reid said he hoped Republican Senate Republican Minority leader Mitch McConnell would help work out a final deal the outlines of which were far from clear with the clock ticking down.
The US economy hit its $14.3 trillion debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally -- but can only do so through Tuesday.
Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment in the wake of the 2008 global meltdown.
Twenty-two House Republicans joined all 188 Democrats voting in opposing Boehner's legislation, while 218 Republicans backed it -- eking out the 216 votes needed for passage in the lower chamber.
A key sticking point was the duration of any debt limit increase: Reid and his Senate allies rejected Boehner's plan in large part because it would set the stage for another high-stakes showdown in a few months.
"We cannot be in this battle all the time," said Reid, whose own plan would spare Obama another politically fraught debt battle as he seeks a second term in the November 2012 elections.
Boehner's bill had sought to pair raising the debt ceiling by $900 billion with spending cuts of some $917 billion over ten years, while requiring later debt limit increases be tied to congressional passage of a balanced budget amendment to the US Constitution for ratification by the 50 states.
Reid, whose Democrats oppose tying the debt limit to such amendment, has offered a blueprint that would raise the debt ceiling by $2.7 trillion while cutting spending by some $2.2 trillion over 10 years.