It is back to the drawing board as US President Barack Obama gathers key Democrats and Republicans at the White House to try to resolve the country’s budget crisis and raise its debt ceiling.
With an August 2 deadline looming, Republicans have rejected a four trillion dollar deficit reduction deal because it included raising taxes.
But US Treasury Secretary, Timothy Geithner, is confident a solution will be found.
Speaking on American TV he said: “The United States is not going to default. We are a country that pays its bills. We’re going to meet our obligations and the Leadership in Congress, Republicans and Democrats, House and Senate, understand that.”
The White House and private economists say an American default could push the US back into recession and trigger global financial chaos.
Democrats want to combine budget cuts with scrapping tax breaks for the wealthy.
But Republicans reject tax increases and are seeking instead bigger curbs on popular benefit programs such as Medicare and Social Security.