A group of Democratic and Republican senators have offered an ambitious plan that could revive stalled US debt talks and the prospect of a long-term deficit reduction deal to avert a default by the United States.

With just two weeks left until the federal government runs out of money to pay all of its bills, President Barack Obama seized on the plan by the so-called Gang of Six as a "very significant step" and urged congressional leaders to start discussing it.

"My hope ... is that they tomorrow are prepared to start talking turkey and actually getting down to the hard business of crafting a plan that can move this forward in time for the August 2nd deadline," Obama said.

But he warned of the need for a backup plan, which Senate leaders were working on, that could be voted on next week. Jon Kyl, the No. 2 Republican in the Senate told reporters: "I've talked to enough people to think it will pass."    

The US government will default on its obligations by that date if Congress does not allow the Treasury to sell more debt. That could force the US economy back into recession and wreak havoc on global financial markets.   

White House talks on a comprehensive deficit-reduction deal have stalled over tax increases, which Republicans oppose.   

Obama, a Democrat, said he hoped the "Gang of Six" proposal -- which would require each party to ease back from entrenched positions -- could help form the basis of an agreement.   

A broad deficit-reduction package would clear the way for Congress to approve an increase in the $14.3 trillion federal debt ceiling. A backup plan by Senate Republican leader Mitch McConnell has gained momentum as a way to raise the ceiling and may end up incorporating parts of the Gang of Six proposal.   

Senate Budget Committee Chairman Kent Conrad, one of the six Democratic and Republican senators who have been working since December on a deficit-reduction plan, said the proposed $3.75 trillion in savings over 10 years contains $1.2 trillion in new revenues. However, additional reform efforts could result in a net $1.5 trillion tax cut, he said.   

The Gang of Six initiative overshadowed a more drastic, $5.8 trillion deficit-reduction plan passed late on Tuesday in the Republican-controlled House of Representatives. Obama opposes the measure, which is expected to be blocked by the Senate.   

In a mostly partisan vote of 234-190, House Republicans rammed through the bill, which also demands a constitutional amendment requiring a balanced federal budget. While it is not expected to become law, the measure could end up giving some Republicans political cover to eventually vote for more modest spending cuts and clear the way for a debt limit increase.

Obama's decision to speak to reporters about the Gang of Six plan even before he had fully read it showed the sense of crisis enveloping Washington as the clock ticks toward the August deadline.

"The problem we have now is we're in the eleventh hour and we don't have a lot more time left," Obama said. The stalemate on debt talks has shaken global markets and credit rating agencies have warned they might downgrade the United States' top-notch AAA rating if lawmakers do not agree on a broad-based deficit-reduction plan.

A $3.75 trillion budget-cutting plan would exceed market expectations, said RBS Securities Treasury strategist John Briggs in Stamford, Connecticut.  - Reuters