From CNN
Washington (CNN) -- Two days before the deadline for a possible U.S. government default, President Barack Obama and congressional leaders reached agreement Sunday on a legislative package that would extend the federal debt ceiling while cutting spending and guaranteeing further deficit-reduction steps.
The proposed $3 trillion deal, which still requires congressional approval, brought some immediate relief to global markets closely watching the situation play out and a nation filled with anger and frustration over partisan political wrangling that threatened further economic harm to an already struggling recovery.
However, there was no guarantee the plan will win enough support to pass both chambers of Congress.
Democratic and Republican leaders in both the House and Senate were briefing their caucuses about the agreement on Sunday night or Monday.
Sen. John Hoeven, R-North Dakota, earlier told CNN that cuts to military spending were a final sticking point.
House Minority Leader Nancy Pelosi, D-California, told reporters that she needs to see "the final product" in writing before she can decide if she supports it.
Pelosi said she would meet with the House Democratic caucus on Monday to discuss the matter.
"I don't know all the particulars of what the final product is in writing and what the ramifications will be," Pelosi said, noting the measure will have an impact for a decade or more. Asked about the outcome, she warned: "We all may not be able to support it or none of us may be able to support it."
In the face of an August 2 deadline to get new authorization to borrow money or face a possible government default, congressional leaders and the White House were trying to complete the agreement that would extend the debt limit through 2012 -- a presidential election year.
Earlier, Reid's Republican counterpart in the Senate said the two parties were "very close" to reaching a deal that would bring $3 trillion in deficit reduction.
"We had a very good day yesterday," Senate Minority Leader Mitch McConnell, R-Kentucky, told CNN, adding that the two sides "made dramatic progress" in negotiations on a deal that would cut government spending and raise the federal debt ceiling.
Another Republican senator, Johnny Isakson of Georgia, later told reporters he expected a Monday vote on a compromise.
"It feels like they're going to finish the deal today and then we'll have the vote tomorrow," Isakson said, adding he supports the plan under discussion.
Democrats in Congress and the Obama administration agreed that progress has been made.
"If there's a word right here that would sum up the mood, it would be relief -- relief that we won't default," Sen. Chuck Schumer, D-New York, said on CNN. "That's not a certainty, but default is far less of a possibility now than it was even a day ago."
If Congress fails to raise the current $14.3 trillion debt ceiling by Tuesday, Americans could face rising interest rates and a declining dollar, among other problems.
Some financial experts have warned of a downgrade of America's triple-A credit rating and a potential stock market plunge. The Dow Jones Industrial Average dropped for a sixth straight day on Friday.
Without an increase in the debt limit, the federal government will not be able to pay all its bills next month. President Barack Obama recently indicated he can't guarantee Social Security checks will be mailed out on time.
In Afghanistan on Sunday, Joint Chiefs of Staff Chairman Adm. Mike Mullen was unable to assure U.S. troops they would get their paychecks following the August 2 deadline without a deal. Mullen said August 15 would be the first payday jeopardized if the United States defaults.
Last week, a Department of Defense official told CNN on condition of not being identified that "it's not a question of whether, but when" military pay gets withheld if no agreement is reached.
Vice President Joe Biden arrived at the White House on Sunday morning, though no additional formal talks involving the administration and congressional leaders have been announced. A Democratic source told CNN on condition of not being identified that Biden was engaged in behind-the-scenes negotiations with both congressional legislators and the administration.
Initial news of a possible deal came shortly after the Senate delayed consideration of a debt ceiling proposal by Reid late Saturday night, pushing back a key procedural vote by 12 hours. When that vote occurred on Sunday afternoon, Republicans blocked a Democratic effort to end debate on the Reid proposal and move to a vote, extending consideration of the plan while negotiations continue.
The vote was 50-49, short of the super-majority of 60 required to pass.
Reid plans to insert a negotiated final agreement into the proposal once a deal has been reached. When it became clear that Democrats would lose Sunday's vote, Reid voted against his own plan in a procedural move to preserve the ability to bring it up again.
According to McConnell and other congressional and administration officials interviewed Sunday, as well as various sources who spoke to CNN on condition of not being identified, the deal under discussion would be a two-step process intended to bring as much as $3 trillion in deficit reduction over 10 years.
Some sources provided differing targets for the total, ranging from $2.4 trillion up to $3 trillion.
A first step would include about $1 trillion in spending cuts while raising the debt ceiling about the same amount. The proposal also would set up a special committee of Democratic and Republican legislators from both chambers of Congress to recommend additional deficit reduction steps -- including tax reform as well as reforms to popular entitlement programs such as Medicare and Social Security.
The committee's recommendations would be put to a vote by Congress, without any amendments, by the end of the year. If Congress fails to pass the package, a so-called "trigger" mechanism would enact automatic spending cuts. Either way -- with the package passed by Congress or the trigger of automatic cuts -- a second increase in the debt ceiling would occur, but with an accompanying congressional vote of disapproval.
In addition, the agreement would require both chambers of Congress to vote on a balanced budget amendment to the U.S. Constitution. Such an amendment would require two-thirds majorities in both chambers to pass, followed by ratification by 38 states -- a process likely to take years.
Schumer told CNN that a main sticking point still under discussion was the trigger mechanism of automatic spending cuts in case Congress fails to enact the special committee's recommendations.
According to sources, cuts in the trigger mechanism would be across-the-board, including Medicare and defense spending, to present an unpalatable alternative for both parties in the event Congress fails to pass the special committee's proposal.
"You want to make it hard for them just to walk away and wash their hands," Gene Sperling, the director of Obama's National Economic Council, told CNN. "You want them to say, if nothing happens, there will be a very tough degree of pain that will take place."
Preliminary reaction showed sensitivity to that pain. Sen. Carl Levin, D-Michigan, said the automatic spending cuts under a trigger mechanism should not affect Medicare benefits for senior citizens.
"The way we understand it's going to be worded is it does not affect beneficiaries. It would affect providers and insurance companies," Levin said. "That should be the case, because if it hits beneficiaries, you're going to lose lots of Democratic votes."
Meanwhile, former U.S. ambassador to the United Nations John Bolton, an aide to former Republican President George W. Bush, warned that automatic spending cuts for the military under the trigger would put national security at risk.
"By exposing critical defense programs to disproportionate cuts as part of the 'trigger mechanism,' there is a clear risk that key defense programs will be hollowed out," Bolton said in a statement.
Overall, the agreement under discussion would increase the debt limit in two stages, both of which would occur automatically -- a key Democratic demand that would prevent a repeat of the current crisis before the next election.
McConnell, who appears to have become the lead Republican negotiator, said he is "very, very close to being able ... to recommend to my members that this is something that they ought to support."
The deal will not include tax increases, McConnell added, expressing a key demand of Republicans. Obama has pushed for a comprehensive approach that would include additional tax revenue as well as spending cuts and entitlement reforms to reduce budget deficits.
Reid, D-Nevada, said Saturday night that the delay in considering his proposal was additional time for negotiations at the White House.
His announcement capped a day of sharp partisan voting in the House and extended talks behind closed doors between congressional and administration officials. Concern continued to grow that Congress will fail to raise the nation's debt ceiling in time to avoid a potentially devastating national default this week.
Earlier Saturday, the Republican-controlled House rejected Reid's plan -- partisan payback for the Democratic-controlled Senate's rejection of Boehner's plan Friday night.
House members rejected Reid's plan in a 246-173 vote. Most Democrats supported the measure; every Republican voted against it.
For their part, Republicans continued to trumpet Boehner's proposal. The measure won House approval Friday, but only by a narrow margin after a one-day delay during which the speaker was forced to round up support from wary tea party conservatives.
Boehner's deal with conservatives -- which added a provision requiring congressional approval of a balanced budget amendment in order to raise the debt limit next year -- was sharply criticized by Democrats, who called it a political nonstarter.
Democratic leaders vehemently object not only to the balanced budget amendment, but also the GOP's insistence that a second debt ceiling vote be held before the next election. They argue that reaching bipartisan agreement on another debt ceiling hike during an election year could be nearly impossible, and that short-term extensions of the limit could further destabilize the economy.
Leaders of both parties now agree that any deal to raise the debt ceiling should include long-term spending reductions to help control spiraling deficits. But they have differed on both the timetable and requirements tied to certain cuts.
Boehner's plan proposed generating a total of $917 billion in savings while initially raising the debt ceiling by $900 billion. The speaker has pledged to match any debt ceiling hike with dollar-for-dollar spending cuts.
His plan would require a second vote by Congress to raise the debt ceiling by a combined $2.5 trillion -- enough to last through the end of 2012. It would create a special congressional committee to recommend additional savings of $1.6 trillion or more.
Any failure on the part of Congress to enact mandated spending reductions or abide by new spending caps would trigger automatic across-the-board budget cuts.
The plan also calls for congressional passage of a balanced budget amendment before the second vote to raise the debt ceiling.
Reid's plan, meanwhile, would reduce deficits over the next decade by $2.4 trillion and raise the debt ceiling by a similar amount. It includes $1 trillion in savings based on the planned U.S. withdrawals from military engagements in Afghanistan and Iraq.
Reid's plan also would establish a congressional committee made up of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed by a Senate vote with no amendments by the end of the year.
In addition, it incorporates a process based on a proposal by McConnell that would give Obama the authority to raise the debt ceiling in two steps while providing Congress the opportunity to vote its disapproval.
Among other things, Reid has stressed that his plan meets the key GOP demand for no additional taxes. Boehner, however, argued last week that Reid's plan fails to tackle popular entitlement programs such as Medicare, which are among the biggest drivers of the debt.
A recent CNN/ORC International Poll reveals a growing public exasperation and demand for compromise. Sixty-four percent of respondents to a July 18-20 survey preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions.
According to the poll, the public is sharply divided along partisan lines; Democrats and independents are open to a number of different approaches because they think a failure to raise the debt ceiling would cause a major crisis for the country. Republicans, however, draw the line at tax increases, and a narrow majority of them oppose raising the debt ceiling under any circumstances.
Bout fucking time! And to all you 535 members of Congress, vote yes!
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