Obama Announces Deal To Raise Debt Limit, Cut Spending

[webfact]

Obama announces deal to raise debt limit, cut spending

WASHINGTON — President Barack Obama and congressional leaders agreed Sunday to cut federal deficits by trillions of dollars over the next decade while raising the nation’s debt limit before Tuesday’s deadline.

"This compromise does make a serious down payment on the deficit reduction we need and gives each party a strong incentive to get a balanced plan done before the end of the year," Obama said Sunday night. "Most importantly, it will allow us to avoid default and end the crisis Washington imposed on the rest of America."

The first part of the agreement could cut nearly $1 trillion in federal spending over the next decade, Obama said, while a special legislative committee will look for more cuts. "Everything will be on the table," he said.

Obama spoke as financial markets opened in Asia — Japan’s Nikkei index had climbed nearly 2 percent within an hour of his remarks — and eased fears that the United States would default on its debt and perhaps slip back into recession.

Congressional leaders of both parties said they would present details of the deal to their members on Monday and were confident that both houses would approve the compromise before Tuesday night, when the nation’s $14.3 trillion debt limit must be increased.

The agreement, forged after weeks of unusually intense, often personal Washington drama, still needs congressional approval.

Senate leaders quickly had warm words for the agreement, but House leaders were more circumspect.

"I know this agreement won’t make every Republican happy. It certainly won’t make every Democrat happy, either," said Senate Majority Leader Harry Reid, D-Nev., who signed off on the deal subject to approval of his caucus.

"Both parties gave more ground than they wanted to. And neither side got as much as it had hoped. But that is the essence of compromise. And the American people demanded compromise this week."

Senate Republican Leader Mitch McConnell of Kentucky praised the agreement. "I think I can say with a high degree of confidence that there is now a framework to review that will ensure significant cuts in Washington spending," he said. "And we can assure the American people tonight that the United States of America will not for the first time in our history default on its obligations."

House Speaker John Boehner, R-Ohio, had concerns that defense spending could be cut too much. But he told House Republicans on Sunday night: "My hope would be to file it and have it on the floor as soon as possible.† I realize that’s not ideal, and I apologize for it.† But after I go through it, you’ll realize it’s pretty much the framework we’ve been operating in."

House Minority Leader Nancy Pelosi, D-Calif., said she wanted to see a final agreement in writing. "We all may not be able to support it, or none of us may be able to support it.† We are open what to what comes down because the stakes are very high," she said.

Congressional leaders spent Sunday in a whirlwind of phone calls, meetings and deliberations, as several scenarios describing deals came and went.

Democratic and Republican negotiators’ chief dispute was over creation of a system for assuring future deficit reduction.

But they agreed on several key points:

— Spending cuts of $900 billion over 10 years on discretionary items, primarily education, housing and transportation programs that Congress can more easily control. Defense would be cut $350 billion.

— No tax increase, although overhauling the tax code would be part of future deficit-reduction efforts. Any automatic cuts would start on January 1, 2013, the same day the Bush tax cuts are due to end. While that suggested the Bush tax cuts could be negotiable, a senior administration official said Obama "is not going to sign something that extends the Bush tax cuts for the wealthy."

— A 12-member, bipartisan legislative committee to recommend further spending cuts, with the goal to come up with $1.5 trillion. If it fell short, the rest would be made up with automatic spending cuts, about half from defense and the rest from non-defense programs. Social Security, Medicare and veterans benefits would be exempt. Medicare cuts would be restricted to provider payments, and would be limited.

A third increase of $1.5 trillion — expected to be enough to get through next year — would occur after the committee’s action, or the automatic cuts, went into effect.

Members of the Congressional Black Caucus and the Congressional Progressive Caucus were expected to urge Obama on Monday to invoke the 14th Amendment and bypass Congress to raise the debt ceiling. The two liberal and mostly Democratic groups are concerned about the extent of the proposed spending cuts in the deal.

Disagreements about the bipartisan committee reportedly held up the final agreement, as well as questions over whether House leaders could get Republican rank-and-file members, including conservative tea party favorites who have opposed raising the debt limit, to go along. House Republicans on Friday passed a deficit-cutting measure that would require a balanced budget amendment to the Constitution be adopted by Congress before the larger debt limit increase would take effect.

But the automatic cut provision was seen as a compromise that both parties could accept.

With the threat of automatic cuts — Democrats have insisted that Medicare not be cut while Republicans have been adamant about not slashing defense spending too deeply — the joint committee would be motivated to find savings on its own.

The multi-stage debt limit increase was a concession by Democrats. They had sought one vote on raising the $14.3 trillion limit, which probably would have meant no more such votes until after the 2012 presidential election.

Source: Agencies

-- 2011-08-01

[webfact]

Asian markets soar on US debt deal

By Danny McCord

HONG KONG (AFP) — Asian stock markets surged on Monday morning after US President Barack Obama said lawmakers had reached a last-minute deal that would raise the country's debt ceiling and avoid a catastrophic default.

Tokyo jumped 1.84 percent by the break, Hong Kong rose 1.42 percent and Sydney added 1.93 percent, while Seoul gained 1.77 percent and Taipei climbed 0.42 percent. Shanghai was flat.

"I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy," Obama said late Sunday in Washington.

The deal will raise the country's $14.3 trillion debt ceiling by about $2.4 trillion in two steps, while calling for roughly the same amount in spending cuts over 10 years.

However, the bill must still be passed by both houses of Congress and Obama urged lawmakers "to do the right thing and support this deal".

Traders worldwide have been on edge for several weeks as the White House and Democrats squabbled with the Republicans over how to make enough budget cuts to allow a hike in the debt limit.

A default by the United States, the world's richest country, would send shudders through the global economy that could lead to another financial crisis.

The news also lifted the dollar after a steady sell-off last week as Democrats and Republicans struggled to come to an agreement.

The greenback was at 77.83 yen in Tokyo at 0200 GMT after briefly rising above the 78 yen level, up from 76.73 yen in New York late Friday.

The euro fetched $1.4387 against $1.4395. The European single unit rose to 111.97 yen from 110.41 yen.

Oil also rallied on the announcement. New York's main contract, light sweet crude for delivery in September, surged $1.53 to $97.23 per barrel.

Brent North Sea crude gained $1.25 to $117.99.

Gold opened in Hong Kong at $1,612.00-$1,613.00 an ounce, unchanged from Friday's finish.

-- (c) Copyright AFP 2011-08-01

[uptheos]

On the bright side this debt deal has ended bi-partisanship bickering in Washington. Now they're all Republicans.

[Joel Barlow]

Oh well - fraud rules.

[Steely Dan]

Financial crisis postponed. Obama would have loved to limp through to election day with no more cuts, but the republicans extracted their pound of flesh knowing they will be likely to inherit the mess Obama left behind.

[Jingthing]

It hasn't passed the house yet.

[DanR]

Shame. I was looking forward to watching the ship go down. Still, with the Taliban Tea Party running wild, I'm sure we'll get to see a rerun before too long.

[Jingthing]

The tea party cares more about their simplistic ideology than the well being of the American people. Any dirty names about them are well apt. It is vital that a big BACKLASH occurs against them, and soon, or the decline of the American empire which is clearly happening, will be accelerated in a dramatic way.

[DanR]

the decline of the American empire which is clearly happening, will be accelerated in a dramatic way.

That's a good thing. The Tea Baggers are crazy but - despite themselves - they're doing good work.

[Jimi007]

Financial crisis postponed. Obama would have loved to limp through to election day with no more cuts, but the republicans extracted their pound of flesh knowing they will be likely to inherit the mess Obama left behind.

LOL!

[koheesti]

Yes, the mess Obama left behind. It's all his now. He's been running the show 2.5 years with 2 years in TOTAL control.

Those evil Tea Partiers want us to stop spending when we have no money. Libs want to get more credit cards and borrow from neighbors. I wonder which way the Libs run their own personal finances when they start running low on money? Do they cut their own spending or go get more credit cards?

[uptheos]

Financial crisis postponed. Obama would have loved to limp through to election day with no more cuts, but the republicans extracted their pound of flesh knowing they will be likely to inherit the mess Obama left behind.

I don't disagree with you, but Palin with the nuclear key?

Bachmann (with or without Turner overdrive)?

Romney - move the capital to Utah?

Who else is credible, the guy roaming around in an SUV - Pendatory or something?

I think Obama will win by default.

[uptheos]

Shame. I was looking forward to watching the ship go down. Still, with the Taliban Tea Party running wild, I'm sure we'll get to see a rerun before too long.

The Tea Party met in prayer this morning. The Taliban do the same before their meetings. As did civilisations that are now extinct.

[DanR]

I wonder which way the Libs run their own personal finances when they start running low on money? Do they cut their own spending or go get more credit cards?

Luckily I'm in the position of having my own currency.

[rucus7]

Luckily I'm in the position of having my own currency.

What currency might that be? The new Amero used by Canada, the United States and Mexico??

[Jirapa]

Shame. I was looking forward to watching the ship go down. Still, with the Taliban Tea Party running wild, I'm sure we'll get to see a rerun before too long.

The Tea Party met in prayer this morning. The Taliban do the same before their meetings. As did civilisations that are now extinct.

Exactly! What have politics got to do with god? And who were they praying to? Jesus I'll bet! Those idiots are dangerous as we're not all Christians and the likes of me follow no text book gods.

[Jingthing]

Exactly! What have politics got to do with god? And who were they praying to? Jesus I'll bet! Those idiots are dangerous as we're not all Christians and the likes of me follow no text book gods.

They are dangerous. But sadly they are the ones with the most passion these days. Democracy, to actually work, needs the active participation of most citizens. The dirty little secret is that in the US, it isn't working. When a radical right wing fringe group that isn't even close to mainstream American political thought can hold the entire global economy hostage, something is really rotten. Some have called them economic terrorists.

Edited August 1, 2011 by Jingthing

[BigBikeBKK]

Financial crisis postponed. Obama would have loved to limp through to election day with no more cuts, but the republicans extracted their pound of flesh knowing they will be likely to inherit the mess Obama left behind.

Would it not be more accurate to say that "the republicans extracted their pound of flesh knowing they will be likely to inherit the mess Obama left behind inherited from George Bush. "?

[Ulysses G.]

Obama has made the national debt much worse without any help from Bush.

[BigBikeBKK]

Obama has made the national debt much worse without any help from Bush.

And has so far managed to stop Bush's recession from turning into a depression...

[Ulysses G.]

Give Obama a little more time.

[up-country_sinclair]

President Bush and the Republican controlled congress brought the US economy to the brink of chaos, and now Republicans are blaming President Obama for not cleaning it up fast enough.

[up-country_sinclair]

^^Racist images certainly don't help to lift the level of discourse. You should be ashamed of yourself.

Edited August 1, 2011 by up-country_sinclair

[maidu]

Social Security, Medicare and veterans benefits would be exempt.

The Tea partyers claim they want to reduce US Federal spending, but they're two faced about it. There are Fed programs they won't consider cutting - usually the same programs that they themselves are benefiting from.

Interesting to note that during the latter part of FDR's presidency, it was the arch conservatives and rich who were against Social Security being instigated. Hmmmm.

Cut all programs by 20%, then go back and see what's most needed, and what's not. Start with PIK (Payment in Kind) programs which pay rich farmers to NOT grow crops. Then go to eradicate programs like Reagan's Star Wars which never worked in its best days, and then million dollar 'studies' which come to conclusions like: "Tricycles tip over" (when paid to study why tricycles might be dangerous). There are boatloads of lard which could be cut, but none on either side of the political aisle have the cojones to do so.

[Steely Dan]

Financial crisis postponed. Obama would have loved to limp through to election day with no more cuts, but the republicans extracted their pound of flesh knowing they will be likely to inherit the mess Obama left behind.

Would it not be more accurate to say that "the republicans extracted their pound of flesh knowing they will be likely to inherit the mess Obama left behind inherited from George Bush. "?

Actually FWIW, The roots of this problem started at the end of the last great depression and accelerated the moment the link between the dollar and a set amount of Gold was scrapped. Ever since then successive governments have overspent and kicked the can down the road to facilitate their hoped for reelection. A Russian economist called Kondratieff postulated there is a cycle in capitalist economies lasting around 70 years which culminate in an asset mania followed by the inevitable bust. The 'progressives' as they laughably refer to themselves believe you can cheat this cycle by printing more and more money (debt), in order to service this debt you need the population to grow at a rate faster than most western economies, hence progressively looser immigration policies and a growing population from civilisations alien or even hostile to the western one. The progressives imho naively believe they can integrate this ever growing influx without tearing their own society apart.

You can't invent a perpetual motion machine and we instead have a Ponzi scheme hidden in a hall of mirrors. When this goes bang we are going to see a shock that makes 2007-9 seem mild by comparison, so when postulating who will be the next U.S leader perhaps picking the one most suited to war will be an idea.

[BigBikeBKK]

Classy Ulysses, real classy...

Fact is Obama was handed a failing economy and was forced to take drastic action in order to prevent either a complete meltdown (depression), or a decade or more of stagflation - no growth. Japan is often cited as an example of what can happen if a government responds too slowly or with too little stimulus.

Up until the very end, much of Bush's spending, as in Iraq and Afghanistan, was elective. Clinton handed Bush a thriving economy and large budget surplus but by the time Bush passed the reins to Obama the US economy was in terrible shape.

You can try to blame the current economy on Obama all you like, but fortunately the majority of Americans know better- http://www.gallup.com/poll/143024/bush-takes-brunt-blame-economy-obama.aspx

[Ulysses G.]

Obama has been in office for a long time and owns the lousy economy. Maybe you need to look at a much more recent poll.

Obama Approval Drops to New Low of 40%

July 29, 2011Forty percent of Americans approve of the job Barack Obama is doing as president in Gallup's three-day rolling average for July 26-28, a new low for him by one percentage point. His overall approval rating essentially matches his recent rating for handling the debt ceiling negotiations. http://www.gallup.com/home.aspx

Edited August 1, 2011 by Ulysses G.

[BigBikeBKK]

Obama has been in office for a long time and owns the lousy economy. Maybe you need to look at a much more recent poll.

Obama Approval Drops to New Low of 40%

July 29, 2011Forty percent of Americans approve of the job Barack Obama is doing as president in Gallup's three-day rolling average for July 26-28, a new low for him by one percentage point. His overall approval rating essentially matches his recent rating for handling the debt ceiling negotiations. http://www.gallup.com/home.aspx

Which is still a hell of a lot better than GW Bush!

GW Bush left office as one of the most unpopular departing presidents in history, with a final approval rating of 22 percent.

Seventy-three percent of Americans say they disapprove of the way Mr. Bush has handled his job as president.

Bush's final approval rating was the lowest final rating for an outgoing president since Gallup began asking about presidential approval more than 70 years ago.

http://www.cbsnews.com/stories/2009/01/16/opinion/polls/main4728399.shtml

I guess Obama's still doing alright (compared to GW anyway)

[Ulysses G.]

Don't worry. Obama still has 1 1/2 years to completely destroy the US economy and claim the prize for worst president of all time from Jimmy Carter.

Edited August 1, 2011 by Ulysses G.

[Steely Dan]

Classy Ulysses, real classy...

Fact is Obama was handed a failing economy and was forced to take drastic action in order to prevent either a complete meltdown (depression), or a decade or more of stagflation - no growth. Japan is often cited as an example of what can happen if a government responds too slowly or with too little stimulus.

Up until the very end, much of Bush's spending, as in Iraq and Afghanistan, was elective. Clinton handed Bush a thriving economy and large budget surplus but by the time Bush passed the reins to Obama the US economy was in terrible shape.

You can try to blame the current economy on Obama all you like, but fortunately the majority of Americans know better- http://www.gallup.com/poll/143024/bush-takes-brunt-blame-economy-obama.aspx

The last chance to avoid a complete meltdown/depression was after the dot.com bust. But no, instead of cold turkey ultra-low interest rates and giving mortgages out like confetti transferred the bubble from stocks to houses. Now houses are bust and the last bubble is about to burst - government debt.

Which brings us nicely on to Japan - too little stimulus, <deleted>!

http://www.economist.com/content/global_debt_clock

Just move your cursor over Japan and see their debt is 197% of GDP, all they have managed to do is bankrupt themselves, indeed the West and Japan would be well advised to invade the rest of the world and strip their assets, I can't see any other way of paying the debt down - I don't suppose they will take it lying down though.