Frantic US debt talks near deal: top senator

US President Barack Obama and top lawmakers raced against the clock on Sunday in hopes of hammering out a deal that would avert a disastrous US debt default and a downgrade in its credit rating.

"There are negotiations going on at the White House to avert a catastrophic default on the nation's debt. There are many elements to be finalized and there is still a distance to go," Senate Democratic Majority Leader Harry Reid said in a late-night announcement.

Obama, his Democratic allies, and his Republican foes have been hunting for a breakthrough deal that would ensure the world's richest nation will have cash to pay its bills past a midnight Tuesday (0400 Wednesday) deadline.

Reid said that, at the White House's request, he was putting off to 1:00 pm (1700 GMT) a test vote on his own plan to raise the ê14.3 trillion US debt ceiling to allow time for a possible compromise.

"They've asked me to give everyone as much time as possible to reach an agreement -- if one can be reached," said the lawmaker. "I'm glad to see this move toward cooperation and compromise. I hope that it bears fruit."

The US economy hit that limit 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 August 2.

Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 percent in the wake of the 2008 global meltdown.

Without a deal, the US government would have to cut an estimated 40 cents out of every dollar it spends, forcing grim choices between defaulting on its debt or cutting back on programs like those that help the poor, disabled and elderly.

Any compromise would still need to clear the divided Democratic-led Senate and Republican-held House of Representatives, where conservatives close to the "Tea Party" movement have called for draconian belt-tightening.

Reid's announcement came after Obama summoned him and Democratic House Minority Leader Nancy Pelosi to an urgent White House summit with Vice President Joe Biden and spoke by telephone to top Senate Republican Mitch McConnell.

Details of the burgeoning accord were still being negotiated, but an aide familiar with the talks said it called for offsetting any debt ceiling increase by matching spending cuts.

According to the aide who spoke on condition of anonymity, under the proposal, the debt ceiling would be increased up to ê2.4 trillion, with $1.2 trillion of spending cuts implemented over 10 years.

A special bipartisan committee would be set up to recommend further cuts of about $1.6 trillion.

The panel must make its recommendations before Thanksgiving recess in November, the aide said. Failure by Congress to approve them by late December would trigger automatic across-the-board cuts, including in defense and the Medicare health program.

The proposed deal would also require a congressional vote on a balanced budget amendment to the constitution, a cherished project of House conservatives, but would not mandate its final approval, the aide noted.

McConnell declared himself "confident and optimistic that we're going to get an agreement in the very near future" and predicted that most Democrats would "fall in line" behind any deal the president cut with Republicans.

Republican House Speaker John Boehner also said he was "confident that we're going to be able to come to some agreement with the White House."

It was unclear whether the deal would be enough to talk ratings agencies down from downgrading the sterling Triple-A US debt rating, causing a spike in interest rates that would throw a wrench into the gears of the already sputtering US economy.

Earlier, aides said key points of contention included the overall size and makeup of spending cuts, and the creation of a special committee of lawmakers tasked with finding more savings in the near future.

The acrimonious talks came after the Republican-led House of Representatives voted to kill Reid's proposal for raising the debt limit, a day after the Democratic-held Senate did the same to Boehner's plan.

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