Congress and the White House are very close to a deal on raising the limit on US borrowing that would avert an unprecedented default on America’s debt, the top Republican in the Senate said today.
Senate Majority Leader Mitchell McConnell said he was nearing a recommendation of the tentative agreement to Republicans in the upper chamber.
It would, he said, extend US borrowing authority, which expires on Tuesday, beyond the 2012 presidential and congressional elections, a fundamental demand of President Barack Obama.
At the same time, the agreement would include none of the tax increases Obama has sought and Republicans had steadfastly rejected. It also includes, he said, the requirement that both houses of Congress vote on a constitutional amendment to balance the budget. The outcome of that vote, however, would have no effect on raising the debt limit.
Senior White House adviser David Plouffe said that both sides are generally in agreement on an emerging package that would cut the deficit in two stages, with key details still being worked out.
Democratic Sen Chuck Schumer said there still was no deal and talks on many issues still needed to be settled. Although he said there was “relief” in Congress and the White House because serious negotiations were now making headway.
The deal, negotiated late last night, would raise the nation’s debt limit would rise in two steps by about 2.4 trillion dollars (£1.46 trillion) and spending would be cut by a slightly larger amount, according to officials close to the talks. The first stage – about one trillion dollars (£608 billion) – would take place immediately and the second later in the year.
Obama is seeking legislation to raise the government’s 14.3 trillion dollars 9£8.7 trillion) debt limit by enough to tide the Treasury over until after the 2012 elections. He has threatened to veto any legislation that would allow a recurrence of the current crisis next year but has agreed to Republican demands that deficits be cut – without tax increases – in exchange for additional US borrowing authority.
Without a compromise in place by Tuesday, administration officials say the Treasury will run out of funds to pay all the nation’s bills. The subsequent default could prove catastrophic for the US economy by causing interest rates to rise and financial markets to sink, sending shockwaves around the world, they say. With financial markets closed for the weekend, lawmakers had a little breathing room, but not much. Asian markets begin opening for the new work week when it is later today in the US capital.
“There is very little time” Obama said last night in his weekly radio and internet address. He called for an end to political gamesmanship, saying “the time for compromise on behalf of the American people is now”.
With a deal in the works, McConnell said at a joint news conference with House Speaker John Boehner yesterday that he was confident a deal could be reached “in the very near future and resolve this crisis in the best interests of the American people”.