US debt limit: Congress to vote on last-minute deal
The US Congress is preparing to vote on a deal struck between the White House and party leaders that would end weeks of uncertainty and avoid a default.
Sunday’s deal would raise the debt ceiling by up to $2.4tn from the current $14.3tn and would cut the US budget deficit by a similar amount.
A bipartisan commission will also be set up to seek further reforms.
The deal needs to pass both houses of Congress to become law, but elements of both parties are expected to oppose it.
Republican and Democratic leaders in the House of Representatives and the Senate are to spend Monday meeting their own party members and attempting to convince them of the merits of the bipartisan deal.
The markets responded to the breakthrough with relief. The Dow Jones index in New York gained nearly 1% soon after opening, following gains in Tokyo and London.
However, the BBC’s Jane O’Brien says the package is still likely to be a tough sell, with some Republicans and Democrats in the House remaining opposed to different aspects.
Newly elected Republicans have consistently refused to compromise in the debate over the debt ceiling, with many insisting on deep and immediate spending cuts and a constitutional amendment to force the US to balance its budget.
Many Democrats, meanwhile, strongly oppose the prospect of cuts to social programmes, benefits and health care for the elderly or lower-paid.
‘We’ve changed the debate’The most intense debate on the deal is likely to come in the House of Representatives, where the divisions are most pronounced.
In the Senate, where a vote is expected around 14:00 local time (18:00 GMT), analysts say there is more of consensus.
Democratic Majority Leader Harry Reid and Republican Senate leader Mitch McConnell were two of those pushing the plan and they are thought likely to be able to corral their troops to approve the deal.
In the House, Democratic leader Nancy Pelosi is expected to ensure enough Democrats vote for the bill to help smooth its passage, analysts say.
Announcing the deal on Sunday night, President Obama himself conceded that the deal was not the one he would have preferred, but noted that the compromise plan would make a “serious downpayment” on the US deficit.
“I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy,” Mr Obama said.
Republican House leader John Boehner – who had negotiated at length with Mr Obama in an eventually fruitless effort to seal a comprehensive deficit-reduction deal – hailed the deal despite its imperfections.
“This isn’t the greatest deal in the world. But it shows how much we’ve changed the terms of the debate in this town,” he said.
The proposed deal calls for:
• At least $2.4tn deficit reduction over 10 years
• New bipartisan congressional committee to recommend a deficit-reduction proposal by November
• A two-stage increase in the debt ceiling.
The recommendations of the new, bipartisan committee tasked with identifying further savings would also be put to a vote in Congress, Mr Obama said.
According to Mr Boehner, those savings would amount to at least $1.5tn, bringing the total spending cuts under the plan to about $2.4tn.
In recent days Republicans, who control the House of Representatives, and Democrats, who control the Senate, have rejected plans drawn up by the rival party in a mounting political battle.
Shares upThe US faces a Tuesday deadline to raise its $14.3tn (£8.7tn) debt limit or risk the first full-scale default in its history, a possibility that has spread mounting unease through international markets.
Democrats and Republicans in Washington have been deadlocked over finding a way to cut spending and raise the debt limit as the Tuesday deadline approached.
The US limits by law the total amount of debt its government can issue, and the Obama administration has been under mounting pressure over how it would continue to pay bills and costs like salaries if the limit was reached.
News of the proposed deal was welcomed by financial markets around the world.
“We welcome the US debt deal and hopefully this will stabilise markets,” Japan’s Chief Cabinet Secretary Yukio Edano said.