Obama announces deal reached to end debt crisis

FROM THE MORNING CALL

WASHINGTON (Reuters) - President Barack Obama announced on Sunday that Democrats and Republicans leaders have reached an agreement to reduce the U.S. deficit and avoid default. The agreement will cut about $1 trillion over 10 years.

President Obama said that spending cuts included in deal to raise the debt ceiling will not happen so quickly that they will drag on the fragile U.S. economy.

In a brief statement, Obama said he would make a detailed case over the next few months for a blanched approach to deficit reduction.

House of Representatives Speaker John Boehner said the U.S. debt deal struck on Sunday cuts spending by $917 billion over 10 years and tasks a panel with finding at least $1.5 trillion more to trim.

In a presentation prepared for a call with his fellow Republicans, Boehner said the joint committee would have to present its findings to Congress by November 23, with an up-or-down vote required by both the House and Senate by December 23.

Lawmakers were close to a last-ditch $3 trillion deal on Sunday afternoon to raise the U.S. borrowing limit and assure jittery financial markets that the United States will avoid a potentially catastrophic default.

The Senate's top Democrat tentatively signed off on an emerging compromise with the Republicans, raising hopes a long battle over cutting the deficit was nearing an endgame. There are two days left to lift the debt ceiling, which caps how much money the United States can borrow to pay all of its bills.

"We're really, really close to an agreement," said Mitch McConnell, the Senate Republican leader who has been in negotiations with Vice President Joe Biden on a plan to reduce the deficit and permit a vote to raise the debt ceiling.

Financial markets showed signs of relief at a deal in the making to meet Tuesday's deadline, as U.S. stock futures jumped and the dollar rebounded on Sunday.

Signaling agreement could be imminent, an aide said Senate Majority Leader Harry Reid would support the deal as long as fellow Democrats back it as well. But another congressional aide said a Senate vote was "highly unlikely" until Monday.

Support was still uncertain in the House of Representatives. Democratic Leader Nancy Pelosi, a leading liberal considered crucial to delivering enough Democratic votes to offset Republican defections, suggested the terms under negotiation would be a tough sell in her party.

She set a meeting with House Democrats on Monday on how to proceed.

A deal would ease the immediate crisis but repercussions will be felt for years to come. Bitter brinkmanship has turned dysfunction seemingly into the norm in Washington, undercut America's stature as the world's capitalist superpower and set the stage for a deeply ideologically 2012 presidential race when President Barack Obama is seeking re-election.

Full congressional approval could come within hours of a final accord, but leaders will first have to gauge whether they have the votes to pass it though the Senate and House, where the political calculus is complicated by the entrenched opposition of some Tea Party-affiliated conservatives.

Many Democrats were also skeptical of the deal that Republicans said would cut deficits by up to $3 trillion over a decade. It would force Democrats to stomach deep spending cuts without the accompanying tax increases they wanted.

Republicans have demanded big spending reductions before they will agree to lift the limit on America's borrowing, turning a normally routine legislative matter into a dangerous game of brinkmanship.

In a sign Democratic leaders may lose the support of their most liberal members, Representative Raul Grijalva said he could not back the plan. He is the head of the 74-member Congressional Progressive Caucus.

"Today we, and everyone we have worked to speak for and fight for, were thrown under the bus," he said.

http://www.mcall.com/news/local/sns-rt-us-usa-debttre7646s6-20110705,0,1138167.story