President Obama on Sunday announced an eleventh-hour deal with congressional leaders to raise the nation's debt ceiling, possibly staving off a first-ever default on the nation's debt.
"There are still some very important votes to be taken by members of Congress, but I want to announce that leaders of both parties in both chambers have reached an agreement to reduce the deficit and avoid default," Obama said at the White House.
The agreement would slice at least $2.4 trillion from federal spending over a decade; the Treasury's authority to borrow would be extended beyond the 2012 elections.
The plan has two parts: In the first, about $1 trillion will be cut in spending over the next 10 years. In the second, a newly created joint committee of Congress would be charged with recommending further deficit reductions by the end of November. The committee's proposals could trigger a debt limit increase of as much as $1.5 trillion, if approved by Congress. But if they do not materialize, automatic spending cuts would be applied across government to trim spending by $1.2 trillion.
"In this stage, everything will be on the table," Obama said.
The deal "makes a serious down payment on deficit reduction we need," Obama said, adding that it will "begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy."
There were no revenue increases in the first part of the deal. Obama said he would spend the next few months persuading lawmakers of the need for a "balanced" approach, one that includes some revenue increases.
The announcement was met with optimism in Asia's stock markets.
Next Step: Congressional Action
The House and Senate must still approve the agreement.
Senate Majority Leader Harry Reid (D-NV) endorsed the agreement and said leaders from both parties and in both chambers will present the agreement to their caucuses Monday.
"To pass this settlement, we'll need the support of Democrats and Republicans in both the House and the Senate," he said on the Senate floor Sunday, just before Obama's remarks. "There is no way either party in either chamber can do this alone."
Also speaking on the Senate floor, Minority Leader Mitch McConnell (R-KY) said the pact "will ensure significant cuts in Washington spending." He assured the markets that a first-ever default on U.S. obligations won't occur.
"There is now a framework to review that will ensure significant cuts in Washington spending," he said.
Although there were indications the deal had found sufficient backing from Senate Democrats, it still lacked support among the most liberal Democrats and conservative Tea Party Republicans in the House of Representatives.
House Speaker John Boehner, in a conference call with Republican members of the lower chamber, said the deal was a good one that met the demands of all Republicans.
"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 that the agreement was "all spending cuts. The White House bid to raise taxes has been shut down."
The House Democratic leader, Rep. Nancy Pelosi, was noncommittal.
"I look forward to reviewing the legislation with my caucus to see what level of support we can provide," she said in a written statement.
No votes were expected in either house of Congress until Monday at the earliest, to give rank and file lawmakers time to review the package.
Earlier Sunday, the Senate voted 50-49 to clear a procedural hurdle toward consideration of a bill put forth by Reid to resolve the debt-ceiling crisis; 60 votes were needed to advance the measure.
Details Of Plan
Details apparently included in the agreement provide that the federal debt limit would rise in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections. Big cuts in government spending would be phased in over a decade. Thousands of programs — the Park Service, Labor Department and housing among them — could be trimmed to levels last seen years ago.
No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise.
The deal under discussion offers wins for both sides. Republicans and their Tea Party supporters would get spending cuts at least as large as the amount the debt ceiling would grow and avoid any tax increases. For Obama and Democrats, there would be no renewed battle over extending the borrowing limit until after next year's elections.
One sticking point had concerned possible cuts in the nation's defense budget in the next two years. Republicans wanted less. Democrats pressed for more in an attempt to shield domestic accounts from greater reductions.
The government has exhausted its $14.3 trillion borrowing limit and has paid its bills since May with money freed up by accounting maneuvers.
The Treasury Department has said it will run out of available cash Tuesday without a debt ceiling extension. The administration has warned that an economy-shaking default would follow that could balloon interest rates and wound the world economy.
If approved in Monday votes, the compromise would presumably preserve America's sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.
Asian Stocks Buoyed
News of the agreements sent Asian stocks higher.
Japan's Nikkei stock index jumped about 1.5 percent. Hong Kong's Hang Seng was up over 1 percent. Markets in Singapore and Australia were also on the rise in early trading.
China and Japan, the world's second- and third-largest economies, were concerned about a potential U.S. default. Together, they hold more than $2 trillion in U.S. treasury securities.
Last week, China's official Xinhua news service called the partisan brinksmanship in Washington "dangerously irresponsible."
NPR's Don Gonyea, David Welna and Frank Langfitt contributed to this report, which includes material from The Associated Press