WASHINGTON- Congress is moving quickly on an agreement to avert a potentially devastating default on U.S. obligations, with legislation that mixes a record increase in the government's borrowing cap with the promise of more than $2 trillion in spending cuts.
After a tense weekend of bargaining, President Barack Obama and congressional leaders announced the agreement Sunday night, providing an instant boost to Asian financial markets and a huge dose of relief to an administration and Congress frazzled by months of partisan warfare and the chance that a default could send the still-fragile economy into recession.
The Senate seems likely to vote first on the measure while House GOP leaders work to assemble support for it. Democratic votes are certain to be needed to pass the measure in the Republican-dominated House, just as Republicans will be needed to clear the measure through the Democratic Senate. Liberal Democrats were already carping that Obama had given away too much to GOP leaders.
"Now, is this the deal I would have preferred? No," Obama said. "But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year."
The still-unreleased legislation would slice more than $2 trillion from federal spending over a decade and permit the nation's $14.3 trillion borrowing cap to rise by up to $2.4 trillion, enough to keep the government afloat through the 2012 elections - a key objective for Obama, whose poll numbers have sagged as the summertime crisis dragged on.
House Speaker John Boehner, R-Ohio, telephoned Obama at mid-evening to say the agreement had been struck, then immediately began pitching the deal to his fractious rank and file.
"It 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 on a conference call, according to GOP officials. He added the agreement was "all spending cuts. The White House bid to raise taxes has been shut down."
House Democratic Leader Nancy Pelosi, D-Calif., was publicly noncommittal. "I look forward to reviewing the legislation with my caucus to see what level of support we can provide," Pelosi said in a written statement. But Democratic officials said she was unlikely to do anything to try to scuttle the package.
Passage seemed likely if not wholly assured. Support from Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., should guarantee Senate approval, but the House could prove more difficult because of defections from left and right alike.
"This deal trades people's livelihoods for the votes of a few unappeasable right-wing radicals, and I will not support it," said Rep. Raul Grijalva, D-Ariz.
Tea party favorite and presidential candidate Michele Bachmann, R-Minn., countered that the deal "spends too much and doesn't cut enough. ... Someone has to say no. I will."
The government presently borrows more than 40 cents of every dollar it spends, and without an infusion of borrowing authority, the government would face an unprecedented default on U.S. loans and obligations - like $23 billion worth of Social Security pension payments to retirees due Aug. 3.
The increased borrowing authority includes $400 billion that would take effect immediately and $500 billion that Obama could order unless specifically denied by Congress. That $900 billion increase in the debt cap would be matched by savings produced over the coming decade by capping spending on day-to-day agency budgets passed by Congress each year.
A special bipartisan committee would be established to find another $1.5 trillion in further spending cuts, probably taken from benefit programs like farm subsidies, Medicare and the Medicaid health care program for the poor and disabled. Republicans dismissed the idea that the panel would approve tax increases.
Any agreement by the panel would be voted on by both House and Senate - and if the panel deadlocked, automatic spending cuts would slash across much of the federal budget. Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.
The pact was sealed during a weekend of talks in which GOP leaders Boehner and McConnell dealt directly with the White House, especially Vice President Joe Biden. The final battle was fought over Pentagon spending cuts, with Democrats emerging with a face-saving victory for $350 billion in defense spending curbs.
But Republicans set the parameters of the debate, with Boehner successfully winning spending cuts equaling the amount of the debt increase - though the cuts phase in over time and future Congresses will have ample temptation to find ways around stringent spending caps called for in the pact.
Obama said such appropriated accounts would be left with the lowest levels of spending as a percentage of the overall economy in more than a half-century.
The measure capped a long saga: first, meetings in a Biden-led group that fell apart over revenues; then, efforts by Obama and Boehner to forge a so-called grand bargain, cutting the deficit by $4 trillion or more over a decade, including new revenues agreed to by Boehner.
In the end, the deal was a split-the-differences compromise, with plenty for both sides to dislike. House GOP defense hawks came out on the losing end. So too did Democratic liberals seeking tax increases.