With a debt deadline on August 2, US lawmakers remains deeply split and the Republicans and Democrats are now pursuing rival budget plans that appeared unlikely to win the necessary support in both houses of Congress.
Top republican John Boehner acrimoniously broke off talks with President Obama at the weekend.
At the same time in Hong Kong US Secretary of State Hillary Clinton sought to reassure Asian investors.
She said: “I am confident that Congress will do the right thing and secure a deal on the debt ceiling, and work with President Obama to take the steps necessary to improve our long-term fiscal outlook.”
In her speech to business leaders Hillary Clinton said the political wrangling was both natural and healthy and promised the US is changing.
“We in the United States are in the middle of a necessary transition. We must save more and spend less … we must borrow less as well,” Clinton said. “Our partners must meet this change with changes of their own.”
Asian investors, who have lent literally trillions of dollars to the US government, are keen for reassurance that the United States would not default on its debt.
The impasse is pushing the United States closer to a downgrade from the ratings agencies as well as a debt default that could trigger global economic chaos.
It is not clear how much comfort the Chinese government and other Asian countries took from Hillary Clinton’s reassurances.
US officials said China was concerned about the US debt impasse and had repeatedly urged Washington to get its economic house in order.
“They’ve basically said that they’ve made a substantial investment in the United States and that they expect — not hope, expect — the United States will abide by its various financial and international commitments. Full stop,” one US official said.