Obama, Congress reach a debt deal

Obama, Congress reach a debt deal

By DAVID ESPO - AP Special Correspondent | AP – 1 hr 16 mins ago

WASHINGTON (AP) — Ending a perilous stalemate, President Barack Obama announced agreement Sunday night with Republican congressional leaders on a compromise to avoid the nation's first-ever financial default. The deal would cut more than $2 trillion from federal spending over a decade.

Default "would have had a devastating effect on our economy," Obama said at the White House, relaying the news to the American people and financial markets around the world. He thanked the leaders of both parties.

House Speaker John Boehner telephoned Obama at mid-evening to say the agreement had been struck, officials said.

No votes were expected in either house of Congress until Monday at the earliest, to give rank-and-file lawmakers time to review the package.

But leaders in both parties were already beginning the work of rounding up votes.

In a conference call with his rank and file, Boehner said the agreement "isn't the greatest deal in the world, but it shows how much we've changed the terms of the debate in this town."

Obama underscored that point. He said that, if enacted, the agreement would mean "the lowest level of domestic spending since Dwight Eisenhower was president" more than a half century ago.

Senate Democratic leader Harry Reid provided the first word of the agreement.

"Sometimes it seems our two sides disagree on almost everything," he said. "But in the end, reasonable people were able to agree on this: The United States could not take the chance of defaulting on our debt, risking a United States financial collapse and a world-wide depression."


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Lawmakers to vote on last-minute debt deal

ReutersBy Andy Sullivan and Laura MacInnis | Reuters – 23 mins ago

WASHINGTON (Reuters) - Congressional leaders scrambled to line up Republican and Democratic votes on Monday for a White House House-backed deal to raise the U.S. borrowing limit and avert an unprecedented debt default.

With votes expected later in the day, the Democratic-led Senate is expected to pass the deal, which raises the $14.3 trillion debt ceiling and cuts about $2.4 trillion from the deficit over the next decade.

But it may face tougher opposition in the House of Representatives where both conservative Tea Party supporters and liberal lawmakers have expressed dissatisfaction with the agreement.

Congressional leaders were consulting their membership to determine who would vote for the deal and who would be against it. Liberals have vowed to oppose it out of concern it would cut spending for popular social programs.

In addition to the $2.4 trillion deficit cut, a new congressional committee is to recommend by late November a further $1.5 trillion in cuts through tax reform and other deficit-reduction measures.

While the deal means the United States is unlikely to default, it is far from certain whether the plan agreed by the White House and lawmakers goes far enough in reducing the deficit to appease credit ratings agency S&P, which has threatened to strip America of its top-notch AAA rating.

Despite that, markets showed signs of relief after becoming unnerved in recent days as lawmakers neared an August 2 deadline to raise the limit on America's borrowing or risk the world's largest economy running out of money to pay its bills.

The Japanese stock index rose 1.8 percent, U.S. stock futures built on earlier gains and the U.S. dollar rose modestly against the yen and the Swiss franc."

But on Monday, a new battle was shaping in Washington over the incendiary topic of taxes.

While the framework of the new deficit reduction plan does not call for new taxes, Democrats see the new congressional committee being formed as a vehicle for gaining new revenues through a reform of the tax code.

House Speaker John Boehner, the top Republican who is seeking to bring restive, anti-tax Tea Party conservatives behind the deal, vowed on Sunday night that the deal is "all spending cuts."

"The White House bid to raise taxes has been shut down," he told House Republicans.

The White House sees the issue otherwise. If tax reform does not succeed in the new committee, President Barack Obama will allow tax cuts put forward by former President George W. Bush to expire in 2013, White House officials said.

White House senior adviser David Plouffe insisted that new tax revenues were on the table.

"I think that's the case the president's going to make, that if we're going to do additional deficit reduction in the fall, it should be tax reform, closing loopholes for the wealthy and big corporations," he told NBC's "Today" show.

(Additional reporting by Jeff Mason and Thomas Ferraro; Writing by Steve Holland, Editing by Jackie Frank )


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