President Obama and congressional leaders announced an agreement Sunday night to raise the debt limit by up to $2.4 trillion, ending a long, partisan stalemate that threatened to send the nation into default.
The announcement caps a weekend of frantic negotiations as both parties worked to beat Tuesday's deadline for a default.
The bipartisan deal is not final until rank-and-file members from both parties give it a green light, but Republican leaders expressed confidence their side would approve it.
The final holdout was House Speaker John BoehnerJohn Andrew BoehnerLobbying world A new kind of hero? Last week's emotional TV may be a sign GOP up in arms over Cheney, Kinzinger MORE (R-Ohio), who tried on Saturday afternoon to walk back cuts slated for defense spending, according to several congressional sources.
A senior Democrat aide said the deal finally came together Sunday when BoehnerJohn Andrew BoehnerLobbying world A new kind of hero? Last week's emotional TV may be a sign GOP up in arms over Cheney, Kinzinger MORE "blinked" and gave up his final demands to exempt the Pentagon from cuts next year.
Obama, in short, televised remarks late Sunday evening, announced that Republican and Democratic leaders had signed off on the deal.
“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,” he said.
The president announced the first part of the agreement would cut nearly $1 trillion in spending over the next 10 years, including many of the spending cuts a group led by Vice President Biden put together earlier in the year.
Obama said annual domestic discretionary spending would reach its lowest level since Dwight Eisenhower was president. He said the cuts are phased in over time to minimize their impact on the fragile economy.
The deal would set up a select 12-member bicameral committee to put together another $1.5 trillion deficit-reduction package that must be reported to Congress by Thanksgiving and which Congress must approve by Christmas.
Committee deadlock or congressional failure to act on the recommendations would trigger $1.2 trillion, across-the-board spending cuts divided evenly between defense and non-defense spending.
The automatic spending cuts would apply to Medicare but not Social Security, Medicaid, veterans or civil and military pay, according to a summary provided by Boehner’s office.
A congressional aide familiar with the deal said the Medicare cuts would not affect beneficiaries. Healthcare providers and insurance companies, however, would see a reduction in payments. Cuts to Medicare would be limited to 2 percent of the program’s cost, according to a Democratic fact sheet.
Total discretionary spending in fiscal year 2012 and 2013 would be reduced by $7 billion and $3 billion, respectively, compared to current levels, according to a Democratic summary. National security cuts would account for half of those savings.
The deal would immediately raise the debt ceiling by $400 billion, giving the Treasury Department enough money to fund the nation’s obligations through September.
A second debt-limit increase of $500 billion would be subject to resolutions of disapproval in Congress, but Obama could veto these measures, which would then require two-thirds majorities in both the Senate and House to override him.
If Congress were to enact the special committee’s $1.5 trillion deficit-reduction package or if Congress were to pass a balanced-budget amendment, Obama would be authorized to raise the debt limit by another $1.5 trillion.
If the committee failed to act, Obama would be authorized to request only a $1.2 trillion increase in the debt limit, according to Boehner’s summary. That amount would have to be matched by automatic across-the-board cuts. The triggered cuts would apply to mandatory and discretionary programs over fiscal 2013 through 2021.
The deal would require both chambers of Congress to vote on a balanced-budget amendment between Oct. 1 and year's end.
Boehner urged his House GOP colleagues to support the deal in a conference call Sunday evening. He said he would not give final approval until they endorsed it.
“I’m gonna tell you, this has been a long battle – we’ve fought valiantly – and frankly we’ve done it by listening to the American people,” Boehner said on the call, according to an excerpt of the call released by his office.
“And as a result, our framework is now on the table that will end this crisis in a manner that meets our principles of smaller government,” he said.
“Now listen, this 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 added.
Boehner apologized to colleagues for the short time to review the plan, likely violating the House Republican's rule of giving lawmakers three days to inspect legislation after it has been filed and before voting on it.
"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," Boehner said on the call.
Senate Majority Leader Harry ReidHarry Mason ReidDemocrats say Biden must get more involved in budget fight Biden looks to climate to sell economic agenda Justice Breyer issues warning on remaking Supreme Court: 'What goes around comes around' MORE (D-Nev.) and Republican Leader Mitch McConnellAddison (Mitch) Mitchell McConnell'Justice for J6' rally puts GOP in awkward spot Republicans keep distance from 'Justice for J6' rally House to act on debt ceiling next week MORE (R-Ky.) praised the agreement on the Senate floor and said the threat of a default had been averted.
“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach historic, bipartisan compromise that ends this dangerous standoff,” Reid said.
McConnell noted: “At this point 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,”
“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.”
Reid and McConnell said they will withhold final consent until their rank-and-file colleagues also have a chance to review the deal.
Senate Democrats and Republicans have both scheduled caucus meetings for 11 a.m. Monday to discuss the proposal.
House Democratic Leader Nancy Pelosi (Calif.) did not endorse the deal in a statement released after Obama's speech but said she would review the agreement with her caucus Monday.
Of the top four Democratic and Republican leaders in Congress, she seemed the least enthusiastic about the pending agreement.
"I have to meet with my caucus tomorrow to see how they wish to proceed," Pelosi told reporters. "We all may not be able to support it, or none of us may be able to support it. But we'll wait and see."
House liberals have already bashed the deal.
Rep. Raúl Grijalva (D-Ariz.), co-chairman of the Congressional Progressive Caucus, said in a statement released Sunday that liberal lawmakers and working families “were thrown under the bus” by a deal that “trades peoples' [sic] livelihoods for the votes of a few unappeasable right-wing radicals.”
He said the result is as bad for the Democratic Party as it is for the country.
Members of the Senate Democratic caucus also voiced misgivings.
Sen. Bernie SandersBernie SandersSunday shows preview: Coronavirus dominates as country struggles with delta variant Democrats urge Biden to commute sentences of 4K people on home confinement Briahna Joy Gray: Push toward major social spending amid pandemic was 'short-lived' MORE (Vt.), an independent who caucuses with Democrats, voted earlier in the day to block legislation crafted by Reid that included many of the same spending cuts as Sunday night’s bipartisan deal.
“I cannot support legislation like the Reid proposal which balances the budget on the backs of struggling Americans while not requiring one penny of sacrifice from the wealthiest people in our country. That is not only grotesquely immoral, it is bad economic policy,” Sanders said.
Sen. Joe Lieberman (Conn.), another Independent in the Democratic caucus, balked at the prospect of steep defense cuts if the special committee set up by the deal deadlocks over future recommendations to reduce the deficit.
Lieberman’s spokesman, Marshall Wittmann, said his boss “strongly believes that protecting the security of the American people is the first responsibility of American government, and that means that any cuts to defense must be fair, limited, and mindful of the fact that we live in a very dangerous world.”
Some Wall Street analysts say news of the deal may reverse the stock market slide of last week, which caused the Dow Jones industrial average to drop more than 500 points.
“If Friday's trading is a lesson, bonds will actually sell off a bit and the stock market may break its losing streak. All of this is occurring, however, amidst some very troubling macroeconomic fundamentals so any rally in stocks, and sell off in Treasuries, will be muted and likely short lived,” said Daniel Alpert, managing partner of Westwood Capital LLC.
—Mike Lillis, Julian Pecquet, Sam Youngman and Erik Wasson contributed to this report.