Republican House Speaker John Boehner has walked away from crunch debt ceiling talks at the White House with US President Barack Obama.
Mr Obama said Mr Boehner had rejected an “extraordinarily fair deal” that would have included $ 650bn (£400bn) of cuts to entitlement programmes.
Mr Obama said he had been willing to take “a lot of heat” from his party.
Mr Boehner said in a letter circulated to the Republican rank and file: “In the end, we couldn’t connect.”
“I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward,” the letter said.
The talks have been aimed at avoiding what analysts say would be a catastrophic US debt default on 2 August.
“It is hard to understand why Speaker Boehner would walk away from this kind of deal,” the president said at a news conference on Friday evening.
“There are a lot of Republicans who are puzzled as to why it couldn’t get done,” he added.
Meanwhile, senior Republican aides have said President Obama and congressional Republicans had been close to reaching a deal to raise the debt ceiling early last week, but said the White House had changed its demand to call for higher taxes.