Washington, Aug 2 (IANS): With the US House passing a compromise debt-ceiling deal crafted by President Barack Obama and congressional leaders, the United States made it all but certain to avoid a catastrophic default.
Overcoming opposition from liberal Democrats and tea party conservatives for ideologically different reasons, the hastily written 74-page bill was cleared by the House on a 269-161 vote late Monday, with 95 Democrats joining 174 Republicans in support.
The Senate is poised to act at noon Tuesday, just hours before the government runs out of cash to pay its bills. However, given the margin in the House and unified support of Senate leaders of both parties, the measure is expected to sail through the upper chamber.
The agreement reached Sunday by Obama and congressional leaders from both parties calls for up to $2.4 trillion in savings over the next decade, raises the debt ceiling through the end of 2012 and establishes a special congressional committee to recommend long-term fiscal reforms.
The legislation needs to reach Obama's desk by Tuesday at the latest. If the current $14.3 trillion debt limit is not increased by that point, Americans could face rapidly rising interest rates, a falling dollar and shakier financial markets.
While a number of Republicans worried about cuts in defence spending and the lack of a required balanced-budget amendment to the Constitution, progressive Democrats were livid over the extent of the deal's domestic spending cuts, as well as the absence of any immediate tax hikes on wealthier Americans.
The agreement revolves around a two-stage process.
The first stage includes $917 billion in savings, including a roughly $420 billion reduction in the national security budget. The cuts would be accompanied by a $900 billion increase in the debt ceiling.
Because of the pending Tuesday deadline, Obama would have immediate authority to raise the debt ceiling by $400 billion, which will last through September, according to the White House.
The other $500 billion increase in the debt limit would be subject to a congressional vote of disapproval that can be vetoed by Obama.
In the second stage, a special joint committee of Congress would recommend further deficit reduction steps totalling $1.5 trillion or more, with Congress obligated to vote on the panel's proposals by the end of the year.