Washington (AFP) - Talks to avoid a US debt default were on a knife edge Saturday as President Joe Biden warned he would not accept "extreme" Republican demands but said he remained optimistic.

"I still believe we'll be able to avoid a default and we'll get something decent done," he told reporters at the G7 summit in Hiroshima, Japan.

With the Treasury Department warning that the US government could run out of money as early as June 1 -- triggering massive economic disruption in the world's biggest economy and likely around the globe -- the political battle in Washington has see-sawed without any clear sign of resolution.

Republicans, who control the House of Representatives, are demanding steep budget cuts as a price for allowing an extension of the government's borrowing authority. The White House is seeking to whittle down Republican demands, while arguing that the traditionally uncontroversial annual debt ceiling increase is being weaponized for political gain.

Hopes for a settlement took a blow Friday when Republicans walked out of negotiations, declaring a "pause."

However, the talks restarted hours later, leading White House Press Secretary Karine Jean-Pierre to say "we are indeed optimistic."

Biden, on the other side of the world for the gathering of rich democracies, was briefed on the situation early Saturday, which was still Friday night in Washington, the White House said.

Biden communications director Ben LaBolt said "Republicans are taking the economy hostage and pushing us to the brink of default, which could cost millions of jobs and tip the country into recession after two years of steady job and wage growth."

While Biden will not accept "extreme" Republican policies, "there remains a path forward to arrive at a reasonable bipartisan agreement if Republicans come back to the table to negotiate in good faith," LaBolt said.

Taxing And Spending

More borrowing is required by the US government just to meet expenditures already made, meaning that refusal by the Republicans to lift the debt ceiling would leave Washington unable to pay its bills, triggering an array of economic shockwaves.

Republicans argue that the more than $31 trillion in US national debt is too high to accept and that there should be agreement on getting the books more balanced, rather than simply authorizing a still-higher debt allowance. They passed three increases in the debt limit without dissent while Donald Trump was president.

Democrats say that they are willing to discuss the budget but that first the debt ceiling needs to be raised without condition so that the existing bills can be paid and US financial credibility preserved.

Briefly calling off the talks on Friday, House Speaker Kevin McCarthy said: "We've got to pause," because "we can't be spending any more money next year." He failed to acknowledge that Trump increased the debt by nearly $8 trillion -- an historic record.

Biden's team says the raft of spending cuts being demanded by Republicans are fueled by the agenda of the party's increasingly dominant hard-right wing.

In his statement, LaBolt said that the Republican budget cuts would lead to large-scale job losses and the weakening of social safety nets, while extending tax breaks for the wealthy. The counter-proposal from the White House is to raise taxes on the wealthy to improve revenue and to accept more limited spending cuts.

In his remarks to reporters, Biden expressed a willingness to be patient.

"It's a negotiation. It goes in stages," he said. Asked if he was worried, he replied: "Not at all."

The president leaves Japan for Washington on Sunday, cutting short a trip that had been set to take him to Papua New Guinea and Australia next week.

Washington (AFP) - Washington's power brokers love playing chicken. But the rest of the world will watch in dread Tuesday when President Joe Biden and Republican leaders meet to negotiate the US debt ceiling -- praying that one side finally blinks.

The White House summit between Biden, House Speaker Kevin McCarthy and Senate Republican leader Mitch McConnell sets in motion the deciding round of a power struggle whose outcome will impact the global economy and could upset the 2024 US presidential election.

The immediate issue is raising the debt ceiling, an arcane budgeting procedure that most years passes with little controversy. Basically, the US government always spends more than has been budgeted but, unlike in most countries, then requires congressional approval to borrow extra.

This year, McCarthy and his radicalized right-wing party have decided to say no, unless Democrats first agree to sweeping budget cuts, giving in to the Republican message that Biden has been profligate and irresponsible.

Biden, who will be joined in the White House talks by the Democratic minority leader in the House of Representatives, Hakeem Jeffries, and the Democratic majority leader in the Senate, Chuck Schumer, accuses Republicans of "hostage" taking.

He insists that the debt ceiling first be raised -- as in other years -- and only then can he and the Republicans discuss cutting the budget to reduce that decades-old accumulated debt, currently the world's biggest at $31 trillion.

A dispute over sequencing might sound academic.

However, with both sides dug in and the deadline approaching, the debate has turned into a life-or-death test of political strength.

Fail to authorize more borrowing and the government will run out of money and default.

Cue worldwide panic.

Soaring interest rates, stock sell-offs, Treasury bond downgrades, and near certain US recession will be on the menu -- and that's before factoring in long-term harm to the US geopolitical brand.

"Even getting close to a breach of the US debt ceiling could cause significant disruptions," warned a White House analysis. "An actual breach of the US debt ceiling would likely cause severe damage."

When is doomsday? No one knows for sure.

But US coffers could run dry as early as June 1, according to the Treasury.

That's just over three weeks from the Tuesday sit-down.

Huge Divide

As the clock ticks away, the divide appears unbridgeable.

The White House is clinging to an "irrational, reckless" strategy and Democrats are "terrified" about allowing "clueless" Biden to negotiate, tweeted the Freedom Caucus -- the group of hard-right Republicans effectively controlling the razor-thin Republican majority in the House.

Biden is not budging.

A strong economic recovery from the Covid era is one of Biden's main cards in his bid for a second term next year. So the 80-year-old has all the more reason to steer the country clear of crisis.

Yet he's also adamant about not caving into the Republican attempt to link budget negotiations to the debt ceiling, saying this will transform a basic, fundamental obligation into a political football.

"They're trying to hold the debt hostage to (get) us to agree to some draconian cuts," he told advisors Friday.

Biden repeated one of his favorite stats, noting that Republicans had voted, without imposing any conditions, to extend the debt ceiling three times during the presidency of Republican Donald Trump.

"No one's ever not voted to increase the debt limit." he said. "I'm going to reiterate to congressional leaders that they should do what every other Congress has done -- that is, pass the debt limit, avoid the default."

Analysts say there are several potential exit ramps from imminent default.

The two sides could simply punt, extending the debt ceiling for a few weeks, while talks continue.

They could come to a messy compromise that resolves the issue by promising yet-to-be-determined budget cuts, but condemning the nation to repeat the whole drama in an election year.

Failing all else, the White House has not ruled out invoking a constitutional power to bypass Congress altogether and unilaterally authorize more borrowing -- except this would likely be challenged in court.

"I've not gotten there yet," Biden said late Friday in an MSNBC interview on use of the 14th Amendment.

Short of an unexpected political truce, however, there are no easy options.

And while much of the world looks on nervously, some countries are watching in glee, the Biden administration warns.

"They love to see chaos in the American system," White House budget director Shalanda Young said, referring to China and Russia. "They love to see that we can't do our basic jobs."