President Barack Obama has held crisis talks with top Democratic Party members after their proposal to avert a federal debt crisis was defeated.
Mr Obama summoned Senator Harry Reid, who leads the Democrats in the Senate, House of Representatives minority leader Nancy Pelosi and Vice-President Joe Biden for talks after a bill to raise the debt ceiling was voted down, by 173 - 246.
A two-thirds majority was needed for the bill to pass.
The ABC reports Republican leaders say they are still confident of striking a deal despite the House rejecting the Democrat's proposal.
Reports say an emerging bargain would lift the debt limit in return for about $US1 trillion in budget cuts.
However, Ms Pelosi said on Sunday that Democrats in the House might decide not to support any last-minute deal.
''We all may not be able to support it, or none us may be able to support it,'' Ms Pelosi said.
]h\ Senate debt bill defeated
Earlier, the Senate defeated a proposal by the Democratic Party to raise the federal debt ceiling on Sunday.
The plan proposed by Senator Reid was defeated by a vote of 50 - 49.
Meanwhile, the Speaker of the House of Representatives said that talks ''are moving in the right direction, but serious issues remain.''
In an email to Republicans, John Boehner said he expected to hold a conference call with them later in the day.
Congress faces a deadline of 2 August to raise the debt ceiling.
The current limit on borrowing by the federal government is $US14.3 trillion.
Senate Republican leader Mitch McConnell said they were looking at $US3 trillion in budget cuts.
Both parties have now rejected each others' proposals in the two houses of Congress.
Senator Reid's bill was defeated 246-173 in the House of Representatives on Saturday afternoon.
An earlier bill by Mr Boehner was defeated in the Senate.
Next moves
Meanwhile, the BBC reports the US Treasury is drawing up emergency plans in case a deal is not reached by Tuesday.
Experts say the government has enough cash to keep functioning for another week or so after that.
Professor Peter Morici of the University of Maryland the deadline of 2 August also says there may be some time to spare.
He told Morning Report the date is an estimate for running out of money by the US Treasury - and if a deal is imminent, it willl be possible to extend the deadline for a few days more.
