Obama, congressional leaders announce deal to raise debt ceiling, cut spending

August 1st, 2011 - 7:29 pm ICT by BNO News  

WASHINGTON, D.C. (BNO NEWS) — U.S. President Barack Obama and congressional leaders on late Sunday evening announced a bipartisan deal to cut federal deficits by trillions of dollars while raising the debt limit to prevent the country from defaulting.

The announcement was made by Obama during a news conference at the White House. “There are still some very important votes to be taken by members of Congress, but I want to announce that the leaders of both parties, in both chambers, have reached an agreement that will reduce the deficit and avoid default — a default that would have had a devastating effect on our economy,” Obama said.

The first part of the agreement will cut about $1 trillion in spending over the next 10 years. “The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President — but at a level that still allows us to make job-creating investments in things like education and research,” Obama said. “We also made sure that these cuts wouldn’t happen so abruptly that they’d be a drag on a fragile economy.”

The initial $1 trillion includes more than $900 billion in spending cuts by capping discretionary spending such as education, housing, and transportation programs. Defense would see a budget cut of $350 billion, which would be the first such cut since the 1990s.

The second part of the agreement is to establish a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit by an additional $1.5 trillion, which will then be put before the entire Congress for an up or down vote. “In this stage, everything will be on the table,” Obama said.

Obama said that a bipartisan deal is necessary as cuts that both Republicans and Democrats would find objectionable would automatically go into effect if the United States were to default. “Is this the deal I would have preferred? No. [..] But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year,” the U.S. President said.

The deal will still have to be approved by the U.S. Congress, and it was not immediately known when votes would be scheduled. Experts said the deal would likely pass the U.S. Senate, although the U.S. House could put up more resistance. Officials said lawmakers would review the package on Monday.

If approved, the deal would increase the country’s debt limit by at least $2.1 trillion, which the White House said would eliminate the need for further increases until 2013.

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