US president Barack Obama announced Sunday that he and top lawmakers had reached an 11th-hour deal to avert a first-ever US debt payment default that would have sown chaos across the world economy.
'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,' he said.
With time running short before a midnight Tuesday (0400 GMT Wednesday) deadline, Obama warned 'we're not done yet' and urged lawmakers 'to do the right thing and support this deal with your votes over the next few days.'
Leaders of the Democratic-held Senate and Republican-led House of Representatives were working to rally polarised lawmakers behind the compromise, with critical votes expected as early as Monday.
'To pass this settlement, we'll need the support of Democrats and Republicans in both the House and Senate. There is no way either party — in either chamber — can do this alone,' said Democratic Senate Majority Leader Harry Reid.
'My hope would be to file it and have it on the floor as soon as possible,' House Speaker John Boehner told fellow Republicans in a conference call, calling it a remedy to avert 'a job-killing national default that none of us wanted.'
As described by Obama and congressional leaders, the deal would raise the country's $14.3 trillion debt ceiling by about $2.4 trillion in two steps, while calling for roughly the same about in spending cuts over ten years.
Asian markets immediately cheered news of the deal, with the dollar climbing against the yen in Tokyo, Australian shares surging 1.4 per cent, and Japna's Nikkei 225 index climbing 1.7 per cent on news of the breakthrough.
The framework would fulfil one of the president's top goals: Raising cash-strapped Washington's ability to borrow by enough to avoid having another politically fraught debt battle before he faces re-election in November 2012.
Republicans crowed that the framework did not explicitly call for raising tax revenues — at least in the first wave of deficit cuts — despite Obama's repeated calls for increasing revenues from the rich and wealthy corporations.
The US government hit its debt limit on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally — but can only do so through August 2.
Business and finance leaders have warned default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 per cent in the wake of the 2008 global meltdown.
Without a deal, the US government would have to cut an estimated 40 cents out of every dollar it spends, forcing grim choices between defaulting or cutting back programs like those that help the poor, disabled and elderly.
It was unclear whether the accord would be enough to placate ratings agencies that have warned Washington's sterling Triple-A debt rating was in jeopardy — a downgrade that would lead to a painful spike in interest rates.
Obama trumpeted that the spending cuts would bring annual domestic government spending to the lower level in 60 years but promised they would not come so 'abruptly' as to be a 'drag' on the fragile US economy, still struggling with stalled growth and 9.2 per cent unemployment in the wake of the 2008 meltdown.
The agreement faced opposition from conservative Republicans close to the 'Tea Party' movement, who have called for draconian cuts, and from liberal Democrats who have vowed to protect the US social safety net.
'The 'deal' he announced spends too much and doesn't cut enough,' said Republican Representative and presidential candidate Michele Bachmann. 'Someone has to say no. I will.'
Democratic Represen-tative Raul Grijalva, co-chair of the Congressional Progressive Caucus, rejected the deal in a blistering statement declaring: 'This deal is a cure as bad as the disease. I reject it.'
Democratic House minority leader Nancy Pelosi, who planned to present the framework to her rank-and-file on Monday, said 'we all agree that our nation cannot default' but gave Obama's announcement a chilly welcome.
Source : New Age
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