House approves debt deal a day before deadline

WASHINGTON Mon Aug 1, 2011 7:46pm EDT

1 of 12. Majority Leader Eric Cantor (R-VA) (C) speaks as House Majority Whip Kevin McCarthy (R-CA) (L) and Speaker of the House John Boehner (R-OH) listen during a media briefing on Capitol Hill in Washington August 1, 2011.

Credit: Reuters/Joshua Roberts

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WASHINGTON (Reuters) - The House of Representatives on Monday approved an 11th-hour deal to raise the borrowing limit, clearing the biggest hurdle to averting a potentially catastrophic debt default.

Just one day before the deadline to lift the debt ceiling, the passage by 269 votes to 161 by the Republican-controlled House paved the way for an expected approval in the Senate of a $2.1 trillion deficit-cutting plan hammered out over the weekend.

The Democratic-led Senate was expected to vote on the plan on Tuesday.

Financial markets worldwide have been rattled by uncertainty over whether the compromise plan could pass the House in the face of objections from conservative Tea Party Republicans and from liberal Democrats.

Having a deal in place by Tuesday to raise the U.S. government's $14.3 trillion borrowing limit will remove the risk of the United States not being able to borrow money to pay all of its bills.

A debt default by the world's largest economy would send shockwaves through the international economic system.

In the hours leading up to the House vote, Republican and Democratic leaders worked furiously to sell their rank-and-file on a deal reached with President Barack Obama in a bid to end an acrimonious impasse that has undermined Americans' faith in their political institutions and hurt America's image abroad.

But fears remained that the United States could still be hit by a damaging credit ratings downgrade, which would raise U.S. borrowing costs, threatening a fragile economic recovery and rattling global investors.

The compromise plan calls for spending cuts over 10 years but no new taxes, creates a powerful new congressional committee to recommend a deficit-reduction package by late November and raises the U.S. borrowing limit into 2013.

It was hard to identify winners in a bitter fight that appeared to be finally winding toward a conclusion after Sunday's compromise agreement.

Obama had to accept deeper spending cuts than he wanted and will have to defend them to his liberal base during his campaign for re-election in 2012, but he could win points with moderates and independents he needs to win a second term.

Boehner, the top U.S. Republican, got cuts he demanded without immediate tax increases, but had to fight an image of being inflexible and a captive of his party's Tea Party wing.

Americans anxious to reduce the country's 9.2 percent jobless rate became increasingly frustrated as the debate raged on through the summer.

(Additional reporting by Richard Cowan, Dave Clarke, Thomas Ferraro, Donna Smith, Andy Sullivan, Lily Kuo, Margaret Chadbourn, Jeff Mason, Caren Bohan an Alister Bull; Writing by Matt Spetalnick and Pascal Fletcher, Editing by Stuart Grudgings and Doina Chiacu)

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Comments (97)
vision966 wrote:
Ha! Ha! Ha! What did I say?! The debacle makes good Hollywood movie. If the slightest pain is inflicted upon the world, the US financial institutions will be the first to experience it and maybe another TARP followed by another TARP and so on! What is evident is not the impact of US default upon the world. That is already part and parcel of the deal and everyone knows it when the USD first became an international currency and US professes to be an open economy. But what will probably happen after this is the US interest rate appears to have to go up, the USD probably declining but not at a rate that is faster than interest rate rise, base prices will escalate reasonably fast, the world’s overall economy is unlikely to crash maybe a bit bumpy and slow that’s all and ultimately the world economy will be reshaped whereby no single country dominates.

Jul 31, 2011 9:10pm EDT  --  Report as abuse
iflydaplanes wrote:
What? So soon? Geez guys you had at least another 24 hours to drag this whole game out! Or did someone forget what day it was?

Jul 31, 2011 9:44pm EDT  --  Report as abuse
McBob08 wrote:
The Democrats have betrayed the American people in not standing firm on the Tax Increases for the Rich. This is a dark day for America, even if the debt ceiling is raised, because it was a solid victory in the Rich’s Class Warfare against the Poor and the Middle Class.

Jul 31, 2011 9:57pm EDT  --  Report as abuse
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