House Democrats may not back debt deal, Pelosi warns

DEMOCRATS in the US House of Representatives might decide not to support a last-minute deal to raise the debt ceiling when they meet today, House Democratic Leader Nancy Pelosi said last night.

“We all may not be able to support it, or none of us may be able to support it,” Pelosi told reporters.

It came just hours after US President Barack Obama’s top ally in the Senate signed on to a long-delayed agreement to raise the government’s borrowing cap and cut spending — subject to approval by his fellow Senate Democrats.

A spokesman for Majority Leader Harry Reid says the Nevada Democrat supports the measure. He was the first top congressional leader to announce support.

Racing to avoid a government default, Mr Obama and Republican congressional leaders were pushing for a compromise to permit vital borrowing by the Treasury in exchange for more than $2 trillion (€1.4tn) in long-term spending cuts.

Senate Republican leader Mitch McConnell said the two sides were “really, really close” to a deal after months of partisan fighting. Yet he and others stressed that no compromise had been sealed, days before a deadline to raise the debt limit and enable the government to keep paying its bills.

As contemplated under a deal that Mr McConnell and US Vice President Joe Biden were negotiating, the federal debt limit would rise in two stages by at least $2.2tn, enough to tide the Treasury over until after the 2012 elections.

Big cuts in government spending would be phased in over a decade. No welfare or Medicare benefits would be cut, but the programmes could be scoured for other savings. Taxes would be unlikely to rise.

Any deal would have to be passed by the Democrat-controlled Senate and Republican-controlled House before going for Mr Obama’s signature.

Without legislation in place by tomorrow, the Treasury will not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on the global economy.

If approved, a 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.