Debt showdown New vote today

Increasing fears of a default led to a sharp slide in the dollar and global stocks as the Republican-controlled House debated a bill drawn up by John Boehner, House Speaker, in the teeth of determine opposition from anti-spending Tea Party hardliners.

In a day of high drama, Nancy Pelosi, the Democratic leader in the House, warned: "What we're trying to do is save the world from the Republican budget. We're trying to save life on this planet as we know it today."

Mr Boehner's plan would cut $915 billion in spending over 10 years in return for raising the $14.3 trillion federal debt limit by a similar amount but requiring another debt ceiling debate at the end of the year. The vote on the Boehner plan, scheduled for 11.15pm British time, is pivotal to a deal.

Jay Carney, President Barack Obama's press secretary blasted the plan. "There is no question that this bill is a political act that has no life beyond its current existence in the House, he said. "It ain't going anywhere in the United States Senate."

But passage of the bill would move it to the Democratic- controlled United States Senate. It would almost certainly be defeated there but senators would then vote over the weekend on an alternative proposal from Senator Harry Reid, the Senate Majority Leader.

Democrats have argued that such a move would only postpone the issue and plunge the country back into crisis in six months time, risking a downgrade by ratings agencies of its Triple-A credit rating.

"Economists have said a short-term deal holds many of the same risks as a technical default. Democrats are not willing to put our economy on the line like that," Reid said.

"Our economy and the financial markets desperately need stability. Speaker Boehner's bill does not provide it."

Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally.

The US Treasury has warned that it will run out of funds on August 2 and will have to make tough choices on which bills to pay if it can no longer borrow any money.