With a day to spare, debt-limit deal done
The House of Representatives last night approved an 11th-hour deal to raise the borrowing limit, clearing the biggest hurdle to averting a potentially catastrophic debt default.
The passage by 269 votes to 161 by the Republican-controlled House paved the way for the 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 today.
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.
The deal to raise the U.S. government’s $14.3 trillion borrowing limit removed 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 fight that finally moved towards a conclusion after a compromise agreement reached on Sunday.