President Barack Obama
President Barack Obama Credit: Reuters/Jason Reed

President Obama today praised the much talked about proposal by the bipartisan "Gang of Six" to try and break the debt reduction deadlock with a plan to wipe $4 trillion off the ballooning national deficit.

The group's ambitious new plan, offers a ray of hope in an increasingly grim standoff that has threatened the United States' top-notch credit rating, but while the president said the deal was a 'very significant step' he also warned that 'We are in the eleventh hour and we don't have much time left.'

The "Gang of Six", which has met all year to try and resolve the debt, is made up of three Democrats and three republicans, including Democrats senators Dick Durbin, Kent Conrad and Mark Warner, and Republican senators Saxby Chambliss, Tom Coburn and Mike Crapo.

Speaking about the plan, President Barack Obama urged the congress to embrace the plan, but ultimately it will be to the congressional leaders to decide whether the plan could point a way out of the impasse.

The initial reaction was positive and senators from both parties embraced it while Republican leaders in the House of Representatives said it contained some good elements.

Talking about the plan, President Obama said 'What it says is we've got to be serious about reducing discretionary spending, both in domestic spending and defense, we've got to be serious about tackling health care spending, and entitlements in a serious way, and we've got to have some additional revenue.', before adding that the plan amounted to 'an approach in which there is shared sacrifice and everybody is giving up something.'

Further speaking at the White House as the August 2 deadline for raising the debt ceiling is fast approaching , he said: 'It's very important in these next couple of days to understand we don't have any more time to engage in symbolic gestures, we don't have any more time to posture.'

The 'Gang of Six' plan calls for an immediate $500 billion "down payment" on cutting the deficit as the starting point toward cuts of more than $4 trillion that would be finalized in a second piece of legislation.

It is expected to raise $1 trillion over 10 years and cut popular benefit programs like Medicare and Medicaid.

That mixture of cuts and new revenue is the "balanced approach" Mr Obama claims, despite many Republican disapproving as they say it would require higher taxes for some.

Facing the deadline in two weeks, Mr Obama said he would call House Speaker John Boehner after today's vote to invite him and other leaders back to the White House for meetings in coming days.

Mr Obama, Mr Boehner and other top leaders met last week for five days but failed to reach an agreement, leading to warnings from credit agencies.

Showing that the White House is well aware of the difficult situation, Obama warned today that while financial markets have shown confidence in Washington so far, it might not last much longer if lawmakers fail to act.