U.S. President Barack Obama warned Monday night that failure to compromise and raise the debt ceiling would severely harm the world's largest economy as Washington is running out of time to avert an unprecedented default by Aug.2.

"If we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy," Obama said in a televised speech to the nation.

He said "both parties have responsibilities to solve the problem," however, there are still two approaches.

The United States already reached its borrowing limit of 14.29 trillion U.S. dollars on May 16, and would default if there is no agreement on lifting the limit by Aug. 2, according to the Treasury Department.

With only a week left before the deadline arrives, Democrats and Republicans remain divided on the approach to solve the problem, risking worldwide repercussions.

Republican leader and House Speaker John Beohner on Monday unveiled a new plan which will take a two-stage deficit reduction plan that would start with an initial 1.2 trillion dollars in savings over 10 years. It is expected to be rejected by Obama because it would raise the U.S. debt limit for only a few months, meaning the issue likely would have to be revisited early next year.

Meanwhile, Senate Majority (Democrat) leader Harry Reid detailed their competing plan for 2.7 trillion in deficit reduction over the next decade but with a debt limit increase that would carry through the November 2012 presidential and congressional elections. Republicans appear unlikely to support this approach.

White House Spokesman Jay Carney said in a statement that Reid's proposal was a "reasonable approach that should receive the

support of both parties."

Obama said failure to compromise and let the country to default on its financial obligation is "reckless and irresponsible."

"We must avoid default," the president said.