US parties reach debt deal to avert default

US President Barack Obama and Congressional leaders of both parties said late on Sunday they had agreed to a framework for a budget deal that would cut trillions of dollars in federal spending over the next decade and clear the way for an increase in the government’s borrowing limit.

With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday in hopes of enacting it before a Tuesday deadline to avert default.

Even as the president was speaking from the White House on Sunday night, Speaker John A Boehner was on a conference call with House Republicans, trying to sell them on the proposal he had signed off on only minutes before. Since he is likely to lose the most conservative elements of his rank and file, Boehner faces the task of framing the pact as friendly enough to Republican principles to win over a significant group of House Republicans, without alienating Democrats he will need to push it over the top.

President Obama, in a hastily called appearance with reporters that ended a day of uncertainty, said the compromise would “allow us to avoid default and end the crisis that Washington imposed on the rest of America.”

“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” he said. “And, it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”

Just before Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.

On Monday morning, the effort on all sides to sell the complex plan to their wider public constituencies began in earnest. With Obama facing much criticism from the left for not pushing harder for tax increases on the rich, Gene Sperling, a top economic advisor, defended the deal. He said the deal protected Pell grants for students and Medicaid spending but did not allow government to be held “hostage” by a Republican threat of default.

“The president stood firm, never blinked and this agreement reflects that,” Sperling said. The agreement calls for $2.4 trillion in spending cuts over 10 years, a new committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.