Deal agreed to prevent U.S. default

WASHINGTON, August 1: Republicans and Democrats in Congress reached agreement with President Barack Obama to raise the limit on U.S. borrowing and forestall an unprecedented American default, marking the start in the final chapter of one of the nastiest and divisive episodes in recent American political history.
Shortly after Senate Majority Leader Harry Reid and his Republican counterpart, minority leader Mitchell McConnell, endorsed the plan on the Senate floor, Mr. Obama went to the White House press room to add his support for the deal. It meets one of his key demands, raising borrowing power sufficiently to keep the partisan poison pill from returning to the national agenda until after the 2012 election. It does not include any tax increases that Mr. Obama had pressed hard for to include.
House Speaker John Boehner, in a conference call with Republican members of the lower chamber, said the deal was a good one that met the demands of all Republicans.
Bowing to the still unknown outcome of congressional action, Mr. Obama said important votes remained to be taken but that leaders of both parties in both houses of Congress were agreed to a plan that would initially cut about $1 trillion from U.S. spending, "the lowest level of domestic spending since Dwight Eisenhower was president' in the 1950s.
"Is this the deal I would have preferred,' Mr. Obama asked, answering his own question with one word. "No.'
But he said- "Most importantly it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. And it will allow us to lift the cloud of doubt and uncertainty' that has hung above the United States for weeks.
And not just America- World markets showed their relief immediately. Japan's benchmark Nikkei index, opening Monday morning -- at 8 p.m. Sunday on America's East Coast -- was up 1.7 percent in early trading. On Wall Street, U.S. stock futures surged.
No votes were expected in either house of Congress until Monday at the earliest, to give rank and file lawmakers to review the package. Tuesday is the deadline to avoid a U.S. default on payments to investors in Treasury bonds, recipients of Social Security pension checks, those relying on military veterans benefits and businesses that do work for the government.
Mr. Obama and many economists and financial experts predicted global chaos and plunging stock markets had no deal been reached by midnight Tuesday.
If approved in Monday votes, the compromise would presumably preserve America's sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.
The broadest outlines of the emerging plan, a deal that involved deep negotiations between McConnell and Vice President Joe Biden, would raise the federal debt limit in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.
Big cuts in government spending would be phased in over a decade. Thousands of programs -- the Park Service, Internal Revenue Service and Labor Department accounts among them -- could be trimmed to levels last seen years ago.
No benefit cuts were envisioned for the Social Security pension system or Medicare, the federal program that provides health care payments to the elderly. But other programs would be scoured for savings. Taxes would be unlikely to rise.
The first step would take place immediately, raising the debt limit by nearly $1 trillion and cutting spending by a slightly larger amount over a decade. (Agencies)


2011-07-31



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