By David Morgan and Richard Cowan
WASHINGTON (Reuters) - The U.S. Senate showed no sign of moving to avoid a looming debt-ceiling crisis on Thursday, as Republicans rejected calls to raise the $31.4 trillion limit without conditions and Democrats dismissed the idea of talks.
A day after the House of Representatives approved a Republican package that would lift the borrowing limit and slash federal spending, lawmakers in both parties dug in as the clock ticked toward a potential first-ever default that could cripple the U.S. economy and unsettle financial markets worldwide.
House Speaker Kevin McCarthy had pushed the bill through along narrow party lines in hopes of jumpstarting talks with Democratic President Joe Biden on lifting the limit, a move needed to cover the costs of tax cuts and spending previously approved by Congress.
"The president is the person who now has the ball in his court. The House has passed a measure. They've raised the debt ceiling," Republican Senator Mitt Romney told reporters. "It's time for the president to respond other than to say, 'no'."
But Democrats countered that while Biden and McCarthy could talk at any time about spending and the deficit, Republicans should not use the debt ceiling to force concessions.
"You don't use brinkmanship on not paying our bills to back people into a corner," Democratic Senator Sherrod Brown told reporters. "The president should sit down with McCarthy anytime, sure. But not to discuss paying our bills."
Maverick Democratic Senator Joe Manchin on Thursday disagreed, calling on Biden to negotiate with McCarthy, saying, "only the President can prevent this from becoming a full-blown domestic crisis."
A prolonged 2011 debt-ceiling standoff led to a downgrade of the U.S. government's credit rating, which pushed borrowing costs higher and hammered stocks. Warning signs are already flashing on Wall Street.
Lawmakers do not know precisely how much time they have left to act. The "x-date" when the Treasury Department would no longer be able to pay all its bills could come as early as June or stretch later into summer.
Treasury is expected to notify Congress about a new "x-date" in coming days, after assessing tax collections.
Democrats rejected outright the House Republicans' debt-ceiling bill. It would increase government borrowing authority by $1.5 trillion or until March 31, whichever comes first, cut spending to 2022 levels and cap growth at 1% a year, repeal some tax incentives for renewable energy and stiffen work requirements for some antipoverty programs.
Democrats hold a narrow 51-49 majority in the Senate, where legislation to raise the debt ceiling would require 60 votes, meaning that nine Republicans would have to support it.
Senate Republicans ruled out the possibility of supporting a debt-ceiling increase that does not also address spending.
"I don't think anything that is generated by the Senate will ever pass the House. An agreement between Biden and McCarthy will," Republican Senator John Cornyn told reporters.
The White House has mobilized nearly every government agency to calculate the impact of the projected 22% budget cut included in McCarthy's legislation for their respective budgets.
"The United States in our history has never failed to pay our debts," White House spokesperson Karine Jean-Pierre said. "We're not a deadbeat nation. Avoiding default is Congress's responsibility and they should act on it immediately."
Democratic Senator Jon Tester suggested a two-track effort to address the debt ceiling and spending questions.
"I would ask for a clean debt ceiling bill and make some assurances that you would put together a bipartisan committee to take a look at ways to reduce the deficit," Senator Jon Tester told reporters.
"It's time to deal with the deficit. There's no doubt about that," Tester said. "But not for the debt ceiling as a backdrop, because you simply just don't want to default."
(Reporting by Richard Cowan and David Morgan; additional reporting by Andrea Shalal and Moira Warburton; Editing by Scott Malone and Alistair Bell)