By Richard McGregor in Washington
The bleak early summer jobs report has added an extra noxious ingredient to negotiations over a deal to allow the world?s largest economy to borrow enough money to keep its government open and solvent.
The shape of any final deal, or even if one can be reached, is still an open question. Just as unpredictable is the political fallout of a failure of the US to honour its debts, or who wins and loses in the compromises needed to forge an agreement.
Barack Obama, US president, has thrown himself into the negotiations with vigour and aggression in the past week, but his decision to stay largely above the fray until recently may have ceded the momentum in the debate to his opponents.
?Obama has let the Republicans dominate the narrative,? said Norm Ornstein, of the American Enterprise Institute in Washington. ?They have been brilliant in defining the narrative away from jobs, which is what got them the big victory [in last November?s elections], back to spending.?
The president has called congressional leaders back to the White House on Sunday to try to get over what both sides admit are deep differences over the structure of a deal to lift the debt ceiling.
The parties all gave themselves wiggle room this week. But, broadly, the Republicans continue to insist that taxes cannot rise overall, while the president and the Democrats, to different degrees, say spending cuts must be balanced by higher revenues.
Mr Obama has set a deadline of July 22 to allow Congress enough time to put into law any agreement before the debt ceiling is reached in early August. Congress?s approval is needed to lift the country?s borrowing limit, now set at $14,300bn.
Without a deal, the Treasury says the US could default on its debts to its creditors, such as China, and have to stop paying welfare cheques, damaging the creditworthiness of the world?s reserve currency and dragging a stagnant economy into a new downturn.
The news on Friday that the economy had only added 18,000 new jobs in June only compounds the uncertainty for both camps about how to manage their positions in the debt talks.
Republicans acknowledge that Mr Obama remains remarkably popular for a president presiding over prolonged economic difficulty, but contend his standing is reaching a ?tipping point?.
Alternatively, Democrats argue that the Republicans have boxed themselves into a corner by insisting under Tea Party pressure that taxes cannot be lifted under any circumstances.
With a deal now likely to include revenue increases, congressional Republicans may be exposed to a grassroots backlash. ?They figured the Tea Party movement could be co-opted but, instead, it has co-opted them,? said Mr Ornstein.
Republicans, however, insist their stance is a winner. ?The Republicans don?t have a tax problem because they are talking about not raising taxes,? said Ed Gillespie, a former chair of the Republican National Committee.
At the end of the day, Mr Obama may prove to have been smart to stay above the fray for so long, positioning himself between the right and left wings of the Republican and Democratic parties respectively in any deal.
But that is if there is an agreement at all. ?It?s not like there?s some imminent deal about to happen,? John Boehner, Republican leader in the House of Representatives, said on Friday. ?This is a Rubik?s cube that we haven?t quite worked out yet.?
? The Financial Times Limited 2011