It’s a deal: Obama, Congress will avert default
Sunday, July 31, 2011
WASHINGTON — Ending a perilous stalemate, President Barack Obama and congressional leaders announced historic agreement Sunday night on emergency legislation to avert the nation’s first-ever financial default. The dramatic resolution lifted a cloud that had threatened the still-fragile economic recovery and rattled global markets.
The agreement would slice at least $2.4 trillion from federal spending over a decade, a steep price for many Democrats, too little for many Republicans.
The deal, with scant time remaining before Tuesday’s deadline for paying government bills, “will allow us to avoid default and end the crisis that Washington imposed on the rest of America,” Obama said.
Not just America. World markets showed their relief immediately. Japan’s benchmark Nikkei index, opening Monday morning — at 8 p.m. Sunday on America’s East Coast — was up 1.7 percent in early trading. On Wall Street, U.S. stock futures surged.
Default, Obama said at the White House, “would have had a devastating effect on our economy.”
House Speaker John Boehner telephoned Obama at mid-evening to say the agreement had been struck, then immediately began pitching the deal to his fractious rank and file.
“It isn’t the greatest deal in the world, but it shows how much we’ve changed the terms of the debate in this town,” he said on a conference call, according to GOP officials. He added the agreement was “all spending cuts. The White House bid to raise taxes has been shut down.”
No votes were scheduled in either house of Congress before Monday, to give rank and file lawmakers time to review the package.
Without legislation in place by Tuesday, the Treasury would not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on the economy.
If approved, though, a compromise would presumably preserve America’s sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.
Even word of an impending deal earlier in the day by Senate Republican Leader Mitch McConnell of Kentucky sent U.S. stock future upward.
Pending final passage, the agreement marked a dramatic reach across party lines that played out over six months and several rounds of negotiating, interspersed by periods of intense partisanship.
“Sometimes it seems our two sides disagree on almost everything,” Senate Majority Leader Harry Reid said in floor remarks.
“But in the end, reasonable people were able to agree on this: The United States could not take the chance of defaulting on our debt, risking a United States financial collapse and a world-wide depression.”
Across the weeks, Boehner emerged as Obama’s principal Republican antagonist in a new contentious era of divided government, yet struggled to corral his own rank and file at times.
At the end, though, McConnell and Vice President Joe Biden provided a negotiating channel to get the deal completed, including a last-minute standoff over the impact of spending cuts on the Pentagon budget.