President Barack Obama has announced a last-minute deal to raise the US borrowing limit and avoid a catastrophic default and he urged lawmakers to "do the right thing" and approve the agreement.
Laying out the endgame in the US debt crisis just two days before a deadline to lift the borrowing limit, the White House and congressional leaders said the compromise would cut about US$2.5 trillion from the deficit over the next 10 years.
With Republican and Democratic leaders in agreement, the Senate will likely vote on the proposed agreement on Monday (Tuesday NZT), a senior congressional aide said. House of Representatives Speaker John Boehner said he would bring it to a vote in that chamber as soon as possible.
"There are still some very important votes to be taken by members of Congress," Obama told reporters at the White House.
"But 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."
"I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days," Obama said.
"'Is this the deal I would have preferred,'' Obama asked, answering his own question with one word. ''No.''
But he said: ''Most importantly it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. An it will allow us to lift the cloud of debt and uncertainty."
He said the first phase of the two-stage plan called for aboutUS$1 trillion in spending cuts over the next decade. The next US$1.5 trillion in savings must be found by a special congressional committee by the end of December.
Financial markets showed signs of relief at a deal in the making to meet the August 2 deadline, as US stock futures jumped and the US dollar rebounded.
The New Zealand dollar also rose on the back of the news, recently trading at US88.32 cents. The kiwi hit another post-float high this morning, opening trade at US88.06.
Democratic and Republican leaders planned to try to sell the deal to their rank-and-file tomorrow. Leaders in the Senate announced agreement on the deal, but support remained especially uncertain in the House of Representatives.
Democratic Leader Nancy Pelosi, a leading liberal considered crucial to delivering enough Democratic votes to offset Republican defections, suggested earlier that the terms under negotiation would be a tough sell in her party.
A deal would ease the immediate crisis but repercussions will be felt for years to come.
Bitter brinkmanship has turned dysfunction seemingly into the norm in Washington, undercut America's stature as the world's capitalist superpower and set the stage for a deeply ideologically 2012 presidential race when President Barack Obama is seeking re-election.
- Stuff, Reuters and AP