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Tuesday, August 2, 2011

U.S. DEBT CRISIS: Framework for budget deal struck in the U.S.!

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Carl Hulse & Helene Cooper, The Hindu / WASHINGTON, August 1, 2011.

BACK FROM THE BRINK: U.S. President Barack Obama after making a statement on the debt crisis at the White House in Washington.
BACK FROM THE BRINK: U.S. President Barack Obama after making a statement on the debt crisis at the White House in Washington - AP.

“I think it’s important as a party to show Americans that we're serious about deficit reduction,” says a Obama administration official.
U.S. President Barack Obama and congressional leaders of the Republican Party and the Democratic Party late on Sunday (local time) agreed to a framework for a budget deal that would cut trillions of dollars in federal spending over the next decade and clear the way for an increase in the government's borrowing limit.
With the fragile economy poised precariously and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday, hoping to enact it before a Tuesday deadline to avert default.

Even as the President was speaking from the White House on Sunday night, Speaker John A. Boehner was on a conference call with House Republicans, trying to sell them on the proposal he had signed off on only minutes before.

Since he is likely to lose the most conservative elements of the caucus, Mr. Boehner faces the task of framing the pact as friendly enough to Republican principles to win over a significant group of his rank-and-file without alienating Democrats who he will need to push it over the top.

Mr. Obama, in a hurriedly called appearance with the media that ended a day of uncertainty, said the compromise would “allow us to avoid default and end the crisis that Washington imposed on the rest of America.”

“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” he said. “And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”

Just before Mr. Obama spoke on television, Harry Reid and Mitch McConnell, the two Senate leaders, took the floor to endorse the pact as well. “I'm relieved to say that leaders from both parties have come together for the sake of our economy to reach a historic, bipartisan compromise that ends this dangerous standoff,” said Mr. Reid, the majority leader.

The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new congressional committee to recommend a deficit-reduction proposal by Thanksgiving (November 24), and a two-step increase in the debt ceiling.

The announcement ended a tumultuous 24 hours that saw hopes rising on Saturday night over the prospects of a deal that might have concluded the budget stalemate. By Sunday, worry set in again as lawmakers and White House officials struggled to hammer out the fine points of an agreement that must clear a Senate controlled by Democrats as well as by the Republican House.

If the deal clears Congress, with its new special joint committee to explore deficit reduction, it will ensure that the size and scope of the federal government and the tension between spending and taxes will remain front and centre in the Washington debate headed into the 2012 election.

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