WASHINGTON - US President Barack Obama will seek "the biggest deal possible" in talks aimed at averting a debt default on Sunday after Republicans shied away from a $4 trillion deficit-reduction deal because it would raise taxes.

Obama and the top US Republican, House of Representatives Speaker John Boehner, are to meet with other congressional leaders at the White House on Sunday night for high-stakes deliberations with a August 2 deadline looming larger.

Boehner, facing stiff opposition from fellow Republicans over the prospects of higher taxes as part of a large-scale budget deal, told the Democratic president on Saturday he would only pursue a smaller, $2 trillion package.

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The move threatened to throw Sunday night's meeting into disarray.

Treasury Secretary Timothy Geithner told NBC's "Meet the Press" that Obama and the Democrats could try to get the "biggest deal possible" and that failure to act could lead to "catastrophic damage" to the fragile US economy.

"This is a grave moment for the country. We need to do something very big, very substantial to bring our long-term deficit down over time," Geithner said.

"It's going to require both sides to compromise. The president's bringing both sides together again at the White House this evening to try to figure out how to move forward," he said.

Failure to act could mean the first-ever default on the nation's financial obligations, which the White House and private economists warn could push the United States back into recession and trigger global financial chaos.

Aides to Obama and Boehner had been working on a far-reaching package of spending cuts and new revenue that would have reduced deficits by $4 trillion over 10 years and cleared the way for lifting the $14.3 trillion cap on the government's borrowing capacity.

But Boehner's move dampened hopes of any immediate compromise and raised doubts about the chances that Sunday's talks would start moving the budget debate toward an end-game.

"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," Boehner, the top Republican in Congress, said in a statement. "I believe the best approach may be to focus on producing a smaller measure."

Boehner and Obama, whose 2012 re-election prospects are tightly linked to US economic and fiscal health, spoke by phone on Saturday and failed to resolve key differences over taxes and entitlement spending.

But after Boehner's announcement, the White House said Obama would not "back off" his efforts toward a comprehensive deal and suggested he might try to change the Republican's mind. Sunday's session is set for 6 p.m. EDT (2200 GMT).

Senate Republican leader Mitch McConnell, appearing on "Fox News Sunday," said, "Nobody's talking about not raising the debt ceiling," and said he was "for the biggest deal possible too. It's just that we're not going to raise taxes in the middle of this horrible economic situation."

McConnell said he believed the sweeping $4 trillion package was off the table.