America’s Republican-controlled House of Representatives has approved a bitterly-fought compromise to prevent a US debt default – with a price tag of deep spending cuts.
The bill, which passed the House by 269-161 votes early today, must still gain approval in the Senate before it goes to the White House where President Barack Obama has promised to sign it into law.
Passage in the Senate is seen as nearly certain. The upper chamber is due to vote on it at noon (5pm Irish time), just hours before the midnight deadline for lifting the 14.3 trillion-dollar (€10tn) cap on US borrowing.
In the minutes before the legislation won approval, applause rang out through the lower chamber as Arizona Democrat Gabrielle Giffords made a dramatic appearance on the House floor, her first since she was gravely wounded in a gun rampage during a meeting with constituents at a Tucson shopping centre in January.
Ms Giffords, 41, has been undergoing rehabilitation since she was shot in the head in the incident, which left six people dead. She acknowledged her warm welcome, standing among colleagues, raising her left hand to wave to fellow politicians.
Her office said she had returned in support of the debt deal bill that was passed by the House.
But while the odds were in favour of House passage, the compromise deal deeply angered both right-wing Republicans and left-wing Democrats.
The measure was crafted through the crucible of one of the United States’ nastiest political fights in recent history, carefully threading the needle between the philosophically opposite ends of the political spectrum.
Polls showed that Congress and even Mr Obama have taken a sharp hit in US public opinion because of the prolonged battle over lifting the debt ceiling, something that past congresses have done as a matter of course.
If the measure does not pass the Senate by midnight, the lack of borrowing power could interrupt payments to investors in US Treasury bonds, recipients of social security pension cheques, anyone relying on military veterans’ benefits and businesses that do work for the government.
The deal also aims to prevent a downgrade of America’s credit rating, and news of the agreement initially buoyed global investors, but European markets surrendered those increases and closed down significantly on worries about the American economy.
US stocks also climbed after opening but slipped well into negative territory after a bad report on American manufacturing. Shares closed the day, however, down only about 11 points, or .09%.
Before the vote, Mr Obama sent a video to Congress aimed at selling Democrats on the plan. “This has been a long and messy process,” he said. “As with any compromise, the outcome is far from satisfying.”
As the Senate opened for business yesterday, majority leader Harry Reid said the deal showed that the often-dysfunctional chamber could come together when it counted.
“People on the right are upset, people on the left are upset, people in the middle are upset,” he said. “It was a compromise.”
The deal came together on Sunday night when Mr Obama sealed a deal with leaders of both parties in both houses of Congress on the plan that would initially cut about one trillion dollars (€700bn) from US spending.
Mr Obama and many economists and financial experts predicted global chaos and plunging stock markets without the legislation.
House speaker John Boehner, obviously pleased and relieved at today’s vote, gavelled the measure as passed. His standing took a beating in the long fight as he struggled to meld the wishes of the low-tax, small-government tea party wing of his party – 87 new members elected last year – and more mainstream Republicans in the House.
The tea party and Republicans more largely successfully blocked Mr Obama’s attempts to raise taxes as part of the plan to slash the deficit, but the president was successful in blocking opposition attempts at a short-term debt ceiling extension that would have returned the now-poisonous issue to the national agenda early next year, in the midst of the presidential and congressional election campaign.
At a news conference last night, Mr Boehner said the compromise would “solve this debt crisis and help get the American people back to work”.
House Democratic leader Nancy Pelosi had asked her caucus to consider voting Yes for passage of the compromise, but had been personally non-committal.