As the US government shutdown enters its second week, the White House on Monday warned that the looming prospect of an unprecedented debt default by the world's largest economy was a "terrible" scenario that would harm America's democracy and global stature.
Top US officials said the political deadlock on the federal budget over President Barack Obama's contentious healthcare programme, popularly known as 'Obamacare', could have potentially catastrophic consequences for the world economy.
Gene Sperling, Director of the National Economic Council, warned that Obama could not allow the House of Representatives to hold him hostage over raising the debt limit because it would set a dire precedent for future presidents.
"The president has made clear the era of threatening default has to be over," Sperling said. "If we sanction that as a regular process, that will do great harm to our democracy, great harm to our economy, great harm to the full faith and credit of the United States," he said, adding that a debt default would be "unthinkable."
House of Representatives Speaker John Boehner said there will be no debt limit increase, and no end to the partial shutdown, unless the President and Senate Democrats negotiate with House Republicans on the Obamacare programme.
A defiant Boehner insisted that Obama must negotiate if he wants to end the shutdown and avert a default that could trigger a financial crisis and recession worse than 2008 when the country plunged into the worst recession since the Great Depression of the 1930s.
"The votes are not in the House to pass a clean debt limit, and the president is risking default by not having a conversation with us," Boehner said.
Treasury Secretary Jack Lew also warned that the budget brinkmanship was "playing with fire" and implored Congress to pass legislation to re-open the government and increase the nation's USD 16.7 trillion debt limit.
"I'm telling you that on the 17th, we run out of the ability to borrow, and Congress is playing with fire," Lew said.
The shutdown has left federal employees on unpaid leave and closed national parks, tourist sites, official websites, office buildings, and more establishments since last Tuesday.
On Sunday, most othe 400,000 Pentagon staff were ordered to return to work by Defence Secretary Chuck Hagel invoking the Pay Our Military Act.
Congress must act by October 17 in order to avoid a debt default by the US government. The government will run out of cash on that day for the first time in US history unless its debt ceiling is raised.
Republicans who control the House of Representatives have refused to approve the budget, saying they would only do so if the healthcare programme was delayed or stripped of funding.
Obama and the Democrats have refused, noting the law was passed in 2010, subsequently approved by the Supreme Court, and was a central issue in the 2012 election which Obama won.