Deeply divided Republican and Democratic leaders are scrambling to find common ground with less than a week before the government hits its borrowing limit approved by Congress, triggering a possible default that would roil global markets.

Even if that fate is avoided, a plan that flinches from hefty deficit cuts could result in a downgrade of America's top-notch credit rating that would raise its borrowing costs and deal a severe blow to its anemic economic recovery.

After weeks of acrimonious debate, the contours of a possible deal have emerged but Republicans and Democrats are digging their heels in on some key demands and blaming each other for putting politics ahead of the national interest.

The chances of a quick resolution narrowed after a vote on a deficit plan by the top Republican in Congress was pushed back to July 28 from July 27.

Republican Speaker John Boehner rushed to rework his bill after an analysis found it would cut spending by US$350 billion less than the US$1.2 trillion over 10 years he had claimed.

President Barack Obama has threatened to veto the Boehner plan and top Senate Democrat Harry Reid described it as "dead on arrival."

The plan has also failed to win the backing of conservative Tea Party Republicans, who have steadfastly refused to back tax rises and want much heavier cuts to social programs that are traditionally protected by Obama's Democrats.

The White House said on July 26 it was working with Congress to craft an unspecified "Plan B," providing a glimmer of hope that an 11th-hour deal could be reached as lawmakers feel the pressure from increasingly anxious financial markets.

The gridlock dragged down US stocks for a second day on July 26 and the dollar continued to slide in early Asian trade on July 27, falling to a fresh four-month low against the Japanese yen.

There have been no signs yet of the panic that could be sparked by a default, with most investors confident that a deal will somehow be struck.

A poll showed Americans are overwhelmingly concerned about the crisis and a majority -- 56 percent -- support a mixture of tax increases and spending cuts that Obama has advocated and Republicans have dismissed.