WASHINGTON (AP) — President Barack Obama said Wednesday he believes Democrats and Republicans will reach agreement on reasonable spending cuts and an end to tax cuts for the superwealthy and flourishing oil companies, avoiding a looming and potentially catastrophic American default on its debt.

He said Republicans, in blocking a deal on raising the debt limit, were threatening U.S. financial stability. It is an “unsustainable” position, he said, for them to continue blocking an end tax breaks for “millionaires and billionaires. tax breaks for oil companies and hedge fund managers and for corporate jet owners.”

The deadline for Congress to agree to raising the U.S. debt limit is less than two months away and the International Monetary Fund, reporting on the same day that Obama spoke at a White House news conference, warned that inaction could lead to a spike in interest rates that would harm the U.S. economy and world financial markets.

The debt limit is the amount the government can borrow to help finance its operations. The United States reached its $14.3 trillion borrowing limit in May. It is at risk of defaulting on its debt if it doesn’t raise that limit by Aug. 2.

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Obama said Democrats were willing to make painful cuts in government spending and that the Republican position, which insists on cuts in government-sponsored medical insurance for the poor and elderly but no increase in tax revenue, was not sustainable.

The president said both parties must be prepared to “take on their sacred cows” as part of the deficit-reduction negotiations.

The IMF urged lawmakers to raise the debt limit, now $14.3 trillion, and warned that failure to do so could produce a spike in interest rates and “severe shock to the economy and world financial markets.”

It recommended a long-term strategy for reducing debt, warning that cutting deficits too quickly could slow the weak recovery of the U.S. economy.

The budget deficit is projected to reach a record $1.4 trillion for the current fiscal year, which ends Sept. 30.

In his opening remarks at Wednesday’s news conference, Obama also called on lawmakers to renew a Social Security payroll tax cut that took effect on Jan. 1, identifying it as one of several measures lawmakers could approve to help create jobs. Social Security is the federal pension program for retired Americans and has been in effect for more than 70 years, dating back to the 1930s Great Depression.

The president said members of Congress needed to stay in Washington until budget negotiations are finished — even if it means canceling other plans back home.

Obama said that while lawmakers have been taking regular recesses, he’s been in Washington working and challenged lawmakers to “stay here. Let’s get it done.”

He said that if there’s not substantial progress by the end of this week, Congress was going to have to start canceling plans for a recess for U.S. Independence Day on July 4 and stay in the capital to work. The Senate is scheduled to be out of session next week.

Obama said his daughters Malia and Sasha get their homework done ahead of time and Congress should too.

He also urged passage of trade agreements with Panama, South Korea and Colombia, and an overhaul of the nation’s patent laws.

Obama’s last previous full-fledged news conference was in March. In the intervening months, the economic recovery has slowed, the president has announced a plan to begin withdrawing U.S. combat troops from Afghanistan and the administration has joined an international military coalition working to prevent the rout of rebels hoping to topple Libyan leader Moammar Gadhafi.

Obama responded at length to claims by many in Congress, members from both parties, that he was in violation of the post-Vietnam War Powers Act by engaging in operations to protect Libyan civilians and overthrow Gadhafi.

He said the operation was limited in scope and did not involve American troops on the ground in Libya and therefore was not covered by the law, which requires the president to seek congressional approval before the country goes to war.

On Afghanistan, Obama said the U.S. mission can be successful, but he is not ready to declare victory just yet. He said the mission, as the United States begins withdrawing troops next month, is narrowly focused on making sure al-Qaida cannot attack the U.S. and helping Afghans maintain their own security. Obama said he believes the U.S. will succeed in those objectives because of the “extraordinary work” of the U.S. military.

Obama said the progress the military has made so far is allowing him to begin bringing troops home. Last week he announced plans for the 33,000 surge forces he sent to Afghanistan to leave the country by the end of next summer. The first 10,000 troops will come home by the end of this year.

Copyright 2011 The Associated Press.