Obama to offer debt ceiling update as deadline nears

Washington -- President Barack Obama is scheduled to hold a news conference at 11 a.m. ET Friday to provide an update on the status of marathon negotiations to raise the federal debt ceiling -- a subject which has brought partisan tempers to a boil over the past week.

Obama told congressional leaders Thursday he expected them to consult with their respective caucuses and find agreement over the next 24 to 36 hours on how to proceed.

The negotiations, reflecting core ideological principles on taxes and the size of government, have become a race against the clock. Administration officials have warned that a failure to raise the current $14.3 trillion debt ceiling by August 2 could trigger a partial default.

If Washington lacks the money to pay its bills, interest rates could skyrocket and the value of the dollar could decline, among other things.

Talks between top Democrats and Republicans over the last five days have failed to produce a concrete deal. Obama suggested Thursday that a sixth meeting could be held this weekend if sufficient progress isn't made, according to a Republican aide familiar with the latest negotiations.

White House Press Secretary Jay Carney said negotiators will have to shift their focus solely to increasing the debt ceiling if they fail to make significant progress by the end of the week on a larger deal cutting spending and raising taxes.

The president, however, made it clear at Thursday's gathering that he opposes a short-term deal -- an option being promoted by House Majority Leader Eric Cantor, R-Virginia -- and still wants a package that trims the federal deficit by $4 trillion over roughly the next decade, a Democrat familiar with the talks told CNN.

Administration officials also discussed extending and possibly expanding the payroll tax cut -- a nod to sagging employment figures -- as well as extending unemployment insurance, the Democrat said.

The seriousness of the situation was reinforced Thursday when a major credit rating agency, Standard and Poor's, said it was placing the United States' sovereign rating on "CreditWatch with negative implications."

"Owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days," Standard and Poor's said in a statement.

Moody's Investors Services -- another major rating agency -- said Wednesday it would put the sterling bond rating of the United States on review for possible downgrade.

A default "would be a calamitous outcome," Federal Reserve Chairman Ben Bernanke told members of the Senate Banking Committee on Thursday. "It would create a very severe financial shock that would have effects not only on the U.S. economy but the global economy."

Treasury Secretary Timothy Geithner told negotiators Thursday that the world financial markets' concerns are twofold: The debt ceiling must be raised, and leaders must put in place a plan to deal with the deficit and debt, according to the Republican aide.

Obama warned earlier this week he could not guarantee that older Americans will receive their Social Security checks next month if a deal is not reached. GOP leaders accused the president of using scare tactics.

Meanwhile, House Speaker John Boehner, R-Ohio, reiterated his concern Thursday that nothing the administration is offering will resolve the country's long-term debt problem, the Republican aide added.

Republicans have tied their support for a debt ceiling increase to deep spending cuts and reforms to entitlement programs. They have also renewed their push for a balanced budget amendment to the Constitution, arguing that it's necessary to achieve fiscal stability. Votes on the measure are expected next week.

Obama has said he agrees with the need for entitlement reform, but vehemently disagrees with GOP opposition to tax increases on the wealthiest Americans.

Part of the Democratic message Thursday was that a few Republicans spurred by the conservative tea party movement were preventing the possibility of a major agreement.

Some members of Congress said the seemingly stalled talks were a sad reflection of an increasingly dysfunctional political process.

"I am very disappointed in the United States Senate," said Sen. Bob Corker, R-Tennessee. "I am very disappointed in the White House. I am very disappointed in all of us. I am very disappointed in the childish behavior that this body has continued to exude over the course of this entire year."

Wednesday's negotiations reportedly ended on a tense note between Obama and Cantor. Obama said the extended political wrangling confirmed what the public considers to be the worst of Washington, according to Democratic sources familiar with the talks who spoke on condition of not being identified.

For his part, Boehner downplayed reports of a split between himself and Cantor. Analysts have speculated that Cantor, viewed in some circles as more conservative than Boehner, may be using the crisis to undermine GOP support for the speaker.

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