President Barack Obama is urging Congress to come up with a bipartisan solution to prevent what he calls an avoidable crisis from occurring on August 2, when the government might be forced into default.
The president spoke Friday morning after the Republican majority in the House of Representatives failed to gather enough votes to pass a measure to raise the debt ceiling in two stages and reduce deficit spending over 10 years by an initial amount of $917 billion.
Video clip of President Obama's statement on the debt crisis
Obama said it is clear that the bill crafted by House Speaker John Boehner lacks bipartisan support and is "holding the U.S. economy captive to Washington politics."
The president said there are modifications that could be made to both the House plan and a proposal by Senate Democrats that could make them acceptable.
"There are plenty of ways out of this mess but we are almost out of time," Obama said. "We need to reach a compromise by Tuesday so our country will have the ability to pay its bills on time, as we always have."
Republicans vs Democrats
On Capitol Hill, House Republicans scrambled to adjust Boehner's legislation to make it more acceptable to members, including Republicans committed to the tax cutting and small government agenda of the conservative Tea Party movement.
Senate Majority Leader Harry Reid said his chamber would proceed with action on the alternative put forward by Democrats calling for $2.5 trillion in deficit cuts, without changes in government entitlement programs.
"The question is, will today's Republicans break away from the shrill voice of the Tea Party and return to the Republican party of Ronald Reagan?" Reid asked.
Senate Minority Leader Republican Mitch McConnell responded, accusing Democrats of trying to prolong the crisis rather than solve it.
"Our Democratic friends here in the Senate have offered no solutions to this crisis that could pass either chamber. Not one," stressed McConnell.
In his statement on Friday, President Obama said damage to the nation's credit rating would hurt Americans in the form of higher interest rates for financial products, from mortgages to credit cards, saying this would be inexcusable.