Efforts led by Vice President Joe Biden to reach a deal that would allow the United States to avoid a debt default reached an impasse on Thursday as Republican Representative Eric Cantor said he was pulling out of the discussions.

Cantor said participants in the talks had identified trillions of dollars in potential spending cuts but were deadlocked over tax increases that Democrats want.

"Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue," Cantor said in a statement.

An aide to Senator Jon Kyl, the other Republican participant, declined to say whether he would take part in the next meeting, scheduled for 2 p.m. EDT.

Negotiators had hoped to reach a budget deal by next week that would give lawmakers the political cover to raise the $14.3 trillion debt ceiling.

The Treasury Department has warned that it will run out of money to pay the country's bills if the U.S. Congress does not act by August 2, a prospect that could push the United States back into recession and rattle markets across the globe.

"That's too bad," Senate Majority Leader Harry Reid, a Democrat, said when reporters told him the news.

A senior Democratic aide was less circumspect. "Clearly the divisions on the Republican side are too much for him to handle," the aide said. "What does it say about your leadership when you pull out of important talks like this at a critical time? When the going gets tough, Cantor gets going."

Cantor said President Barack Obama must "speak clearly and resolve the tax issue."

Reid declined to say whether he would now take over negotiations with Obama and House of Representatives Speaker John Boehner, the top Republican in Washington, as many have expected.

Congressional Democratic leaders were meeting at the White House on Thursday with Obama to discuss the talks.