Barack Obama has reached an agreement with Republican and Democratic congressional leaders aimed at ending the US debt deadlock that threatened to throw the US and world economy into chaos. However, in an address from the White House, he warned: “We are not done yet.”
President Obama, in a hastily called appearance with reporters that ended a day of uncertainty, said that the compromise would “allow us to avoid default and end the crisis that Washington imposed on the rest of America.”
The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.
“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” he said. “And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.” After weeks of frustrating negotiation in Washington, Obama said: “This process has been messy and taken too long.”
The White House hinted that the deadline could be extended for a few days to allow Congress to get legislation through.
Senate Majority Leader Harry Reid (D-Nev.) announced the deal on the Senate floor, saying it was a historic compromise that will require bipartisan action. “There is no way either party — in either chamber — can do this alone,” Reid said.
Sen. Mitch McConnell (R-Ky.), the Senate minority leader, followed Reid, saying, “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.”
Gene Sperling, a top economic advisor, defended the deal on MSNBC. He said the deal protected Pell grants for college students and Medicaid spending, but perhaps more important, did not allow government to be held “hostage” by a Republican threat of default. “The president stood firm, never blinked and this agreement reflects that,” Mr. Sperling said.
The deal sparked an immediate backlash from the left of the Democratic party because it also includes about $2.5tn in spending cuts, much of which is almost certain to come from welfare benefits. The left-leaning grassroots organisation MoveOn described it as “grotesquely immoral”.
Markets reacted favorably to the announcement, with Asian markets jumping on news of the deal. Stocks rallied in Japan, Australia and South Korea as the new trading week began. The dollar rose, gold fell and Treasury bond yields edged higher.