Obama announces bipartisan debt ceiling deal, urges passage in Congress

14:57, August 01, 2011      

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U.S. President Barack Obama Sunday night unveiled a last-minute debt ceiling deal endorsed by Republican and Democratic leaders, in a bid to stave off a looming debt default crisis and ease market jitters.

The U.S. federal government's borrowing limit, currently at 14.29 trillion U.S. dollars, was reached on May 16. The Treasury Department said that it would run out of cash to pay its bills unless Congress agreed to raise the limit by Aug. 2.

Obama stressed the deal also promised deficit cutting, saying the first tranche of deficit cutting would be about 1 trillion dollars over the next decade. But he said spending cuts would not come too quickly to hurt the fragile U.S. economic recovery.

"The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President -- but at a level that still allows us to make job-creating investments in things like education and research," he said.

The package would also set up a bipartisan and two-chamber congressional committee to find new deficit reduction ways in line with the second tranche of debt limit increase by November, Obama noted.

The White House said the panel will be tasked with finding a deficit of at least 1.5 trillion dollars to trim.

An enforcement mechanism will also be established to force all parties to agree to balanced deficit reduction. If the committee fails, the enforcement mechanism will trigger spending reductions beginning in 2013, with evenly split spending cuts between domestic and defense programs.

However, the enforcement protects Social Security, Medicare beneficiaries and low-income programs from any cuts, the White House said.

Obama said this deal was not the one he preferred, 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."

This deal would lift the federal debt limit in two stages by at least 2.1 trillion dollars, enough for the White House to tide over the 2012 elections, a stance the Obama administration strongly supported.

However, it was a tentative proposal, as any compromise plan still needs to clear a Democratic-controlled Senate and a Republican-held House, where many of the 87 freshman lawmakers are Tea Party-backed conservatives who have asked for steep spending cuts and a balanced budget amendment to the Constitution.

"We're not done yet," Obama said, urging U.S. lawmakers to approve the debt ceiling compromise plan in the next few days.

Leading U.S. lawmakers including Senate Majority Leader Harry Reid Sunday expressed optimism for a deal within reach and offered support to the emerging package.

After speaking to U.S. Vice President Joe Biden Sunday morning, Reid said on the Senate floor that he was "hopeful" that Democratic negotiators were "close to an agreement" with Republican leaders.

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