Senate Majority Leader Harry Reid has approved a tentative agreement with Republican leaders and the Obama administration to raise the U.S. debt ceiling pending approval by fellow Senate Democrats, according to a spokesman.
“Senator Reid has signed off on the debt-ceiling agreement pending caucus approval,” Reid communications director Adam Jentleson said in a statement.
Congressional leaders and the Obama administration negotiated to finish the details of the agreement to raise the debt ceiling, paving the way for possible votes in the Senate tonight and the House tomorrow on a plan to avert a U.S. default and calm market concerns.
“We’re really, really close to an agreement, and we’ll let you know when we get it,” Senate Republican leader Mitch McConnell told reporters as he left the Senate chamber today. Earlier, he said Republicans and President Barack Obama had made “dramatic progress” on a compromise yesterday. Senate Majority Leader Harry Reid told reporters he hoped his chamber could vote on the measure tonight.
After a weekend of discussions between Republicans and Obama’s team, House leaders were aiming to schedule action on the emerging compromise to raise the $14.3 trillion debt ceiling, cut spending by about $1 trillion. The plan also calls on Congress to decide by year’s end how to shave another $1.5 trillion from long-term debt by 2021 -- or face punishing reductions across all government areas, including Medicare and defense programs, according to congressional officials.
House Speaker John Boehner of Ohio was to brief rank-and- file Republicans later today, as negotiators worked to complete it and draft legislative language, a Republican aide said.
Stock Futures Surge
U.S. stock-index futures surged, indicating the Standard &
Poor’s 500 Index may rebound from its worst weekly loss in a year, amid optimism lawmakers will reach an agreement in time to avert a default on Aug. 2, when the Treasury Department has said
it will run out of cash to pay bills.
S&P 500 futures expiring in September rallied 1 percent to 1,304 at 7:01 a.m. in Tokyo. Dow Jones Industrial Average futures climbed 145 points, or 1.2 percent, to 12,223. The U.S. dollar strengthened 0.7 percent against the yen and 1.1 percent versus the Swiss franc. IntercontinentalExchange Inc.’s Dollar Index, which measures the currency against six U.S. trading partners, fell in each of the past three weeks.
As negotiations continued, a Democratic plan backed by Reid fell short of the 60 votes needed to overcome Republican efforts to block it in the Senate. The vote was 50-49, with Reid switching his vote to “no” so he could bring the matter back for reconsideration -- a way of expediting a vote on a final compromise.
Reid said he’s “cautiously optimistic” a deal can be reached.
“We’re not there yet,” he said.
The White House was cautioning that there still was no compromise. Communications Director Dan Pfeiffer said in a Twitter message that the two sides have “important issues to work out.”
Under the emerging plan, a bipartisan congressional super- committee would be charged with coming up with the savings by late November, and its recommendations would receive expedited consideration and a certain vote by Christmas. Negotiators were still working to finalize details of the so-called trigger mechanism meant to ensure the deficit-reduction package materialized.
Even if Congress didn’t produce deficit savings, spending reductions wouldn’t be triggered until after fiscal 2012, according to an official familiar with the plan. If the automatic cuts were instituted, the president could choose to replace the defense reductions with other cuts, the official said.
With just two days left before the Treasury Department has said the nation would default without additional borrowing authority, both sides had made concessions in search of an accord. Republicans dropped their insistence on withholding some of the borrowing authority until future spending cuts had been made and a balanced budget amendment to the Constitution had been passed by both houses of Congress, according to a person familiar with the talks.
The White House agreed to forgo an automatic tax increase, a sticking point for Republicans, as one of the consequences to kick in if no debt-reduction law is enacted by Christmas, according people familiar with the discussions.
“My sense is the leadership will step to the floor sometime later today and express greater optimism about this being resolved prior to Tuesday, and hopefully that will be enough to calm markets until that happens,” said Republican Senator Bob Corker of Tennessee.
Both sides anticipated resistance from within their own ranks.
‘Very, Very Close’
“I’m sure there will be both Democrats and Republicans who in the end find the agreement wanting in one way or another, but I believe there will be a strong bipartisan support for this,” McConnell, of Kentucky, said on CBS’s “Face the Nation” program. “This deal has not been finalized yet, but I think we are very, very close to something that I can comfortably recommend to” Republicans.
Republican Senator Ron Johnson said he was “highly concerned” about the size of the cuts being discussed, saying they were too small to make a real difference in reining in the debt.
“I’m afraid this is not going to fix the problem, and that’s the one reason I came here,” said Johnson, a first- termer elected with Tea Party support.
Socially liberal groups and lawmakers expressed anger at the emerging package because it omits tax increases while cutting deeply into government spending and threatening still more reductions to safety-net programs such as Medicare.
“This deal does not even attempt to strike a balance between more cuts for the working people of America and a fairer contribution from millionaires and corporations,” Representative Raul Grijalva, the Arizona Democrat who leads the Progressive Caucus, said in a statement. “I will not be a part of it.”
Under the framework begin discussed, Congress would be required to vote on a balanced budget amendment to the Constitution, and passage by both houses would be enough to avoid the automatic spending cuts threatened if Congress failed to enact the debt-reduction measure, the Republican aide said. Amendments require two-thirds majorities for passage; if enough Democrats oppose the measure, it would have little chance of winning approval.
Obama and congressional Democrats have insisted that any deal be a “balanced approach” that includes revenue, raising questions about whether the president would find substantial support from his party for the plan.
“You’re going to have to have closing of tax loopholes. You’re going to have to have revenue produced to close the deficit,” David Plouffe, a special adviser to Obama, said on ABC’s “This Week.”
McConnell, while saying on CBS that the agreement will “avoid raising taxes,” added that the deficit-reduction panel will have a broad mandate to “tackle tax reform” as well as entitlement programs.
White House press secretary Jay Carney has said repeatedly that if a deal is reached, Obama would be willing to sign a short-term extension of the debt ceiling for several days if necessary to give Congress time to pass the agreement.
Mohamed A. El-Erian, whose Pacific Investment Management Co. is the world’s largest manager of bond funds, was less optimistic. In an interview on ABC News “This Week,” he said that if Standard & Poor’s “sticks to what it said, it will downgrade” the U.S. debt following the deal.
S&P, which has given the U.S. a top AAA ranking since 1941, said on July 14 that the chance of a downgrade within three months is 50 percent, and a reduction may occur as soon as August if there isn’t a “credible” plan to reduce the nation’s deficit.
While the compromise shaping up will probably assuage immediate concerns about default in financial markets, “this relief will be short,” said El-Erian, PIMCO’s chief executive officer.
The agreement “does nothing to restore household and corporate confidence, so unemployment will be higher than it would have been otherwise. Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise,” El-Erian said.
--With assistance from Heidi Przybyla, Lisa Lerer, Daniel Enoch, Katarzyna Klimasinska, Brian Faler, Kathleen Hunter, Catherine Dodge, Peter Cook, Julianna Goldman, Roger Runningen and Don Frederick in Washington. Editors: Robin Meszoly, Jodi Schneider
To contact the reporters on this story: Julie Hirschfeld Davis in Washington at email@example.com; Mike Dorning in Washington at firstname.lastname@example.org
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