Barack Obama has warned that a political stalemate over raising the US government's borrowing limit has become a "dangerous game" and the entire world is watching.The US President took the unusual step of giving a nationally televised address today to pressure Republicans in congress into accepting compromise.
The consequences of not increasing the debt ceiling, he warned, were an increase in the US government's AAA credit rating and higher interest rates.
"We would risk sparking a deep economic crisis - one caused almost entirely by Washington," Mr Obama said.
The US government faces a default on debt unless the congress agrees to authorise an increase in the $US14.3 trillion ($A13.1 trillion) borrowing limit by August 2.
Republicans in the House of Representatives have refused to accept an increase in the borrowing limit unless it is matched by big-budget spending cuts.
The President has also rejected a Republican proposal for a short-term increase until the end of this year while negotiations continue with his Democratic Party to achieve up huge budget deficit reductions to match any increases in debt.
In an effort to win public support for his position, Mr Obama warned that a US default for the first time would be reckless and irresponsible.
Instead he pushed his proposal for a balanced outcome that accepted a debt increase in return for budget deficit reduction based on government spending cuts and increased tax revenue.
He wants a debt increase to run past the presidential election in November next year and into 2013.
Mr Obama warned today that a six-month extension of the debt limit in exchange for $US1 trillion in budget cuts as Republicans want would not necessarily avoid a downgrading in the US credit rating and would only lead to a repeat of the current stand-off in six months over further government spending cuts.
"Based on what we've seen these past few weeks, we know what to expect six months from now," the President said.
"The House will once again refuse to prevent default unless the rest of us accept their cuts-only approach.
"Again, they will refuse to ask the wealthiest Americans to give up their tax cuts or deductions. Again, they will demand harsh cuts to programs like Medicare. And once again, the economy will be held captive unless they get their way.
"That is no way to run the greatest country on Earth. It is a dangerous game we've never played before, and we cant afford to play it now.
"Not when the jobs and livelihoods of so many families are at stake. We can't allow the American people to become collateral damage to Washington's political warfare.
"Congress now has one week left to act, and there are still paths forward." Mr Obama said that Democrats in the Senate had introduced a plan to avoid default by making a down payment on deficit reduction and ensuring that the US did not have another debt crisis in six months.
"I think that's a much better path, although serious deficit reduction would still require us to tackle the tough challenges of entitlement and tax reform," he said.
"Either way, I have told leaders of both parties that they must come up with a fair compromise in the next few days that can pass both houses of Congress - a compromise I can sign. And I am confident we can reach this compromise."