Obama, Hill leaders reach debt deal, set out to sell it

WASHINGTON -- President Barack Obama and congressional leaders hammered out an emergency agreement Sunday that would permit more government borrowing while taking a whack at the deficit. Then they set out to sell the deal to lawmakers just two days before the Treasury Department runs out of money to pay all its bills.

No votes were scheduled until today at the earliest, after Senate leaders run the details by their rank-and- file members and as House leaders warm up their vote-counting operations for what could be a close vote before the Tuesday night deadline for default.

The agreement would allow the $13.4 trillion debt ceiling to be raised by as much as $2.4 trillion in two phases, enabling the government to borrow enough to carry into 2013 -- and past Obama's re-election campaign of 2012.

The trade-off would be $1 trillion in spending reductions over 10 years that would force deep cuts in thousands of federal programs. Further, the agreement creates a 12-member "super committee" in Congress charged with recommending $1.5 trillion in further savings by Thanksgiving.

If Congress fails to follow through, automatic spending cuts would be triggered in both defense and non-defense programs, with defense cuts amounting to about $50 billion a year. Social Security, Medicaid, veterans benefits, military pay and women's and children's programs would be exempted from the automatic cuts.

At the White House, Obama said the agreement "will reduce the deficit and avoid default that would have had a devastating effect on our economy."

CONGRESSIONAL LEADERS REACT

On Capitol Hill, Senate Majority Leader Harry Reid said both sides gave up more than they wanted, "and neither side got as much as it had hoped.

"I know this agreement won't make every Republican happy. It certainly won't make every Democrat happy, either ... but that is the essence of compromise.

"Sometimes it seems our two sides disagree on almost everything," the Nevada Democrat said. "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."

"We can assure the American people tonight the United States of America will not in the first time in its history default on its obligations," said Senate Republican Leader Mitch McConnell of Kentucky, who initiated the weekend talks with Obama and Vice President Joe Biden that produced the agreement.

Aides said House Speaker John Boehner, R-Ohio, had not yet signed off as he was taking the temperature of his caucus, including hawks not happy about possible defense cuts.

Boehner briefed House Republicans in a Sunday night conference call. He stressed the deal cuts more spending than it allows in future borrowing and does not contain tax increases that are anathema to most in his caucus.

It also requires Congress to vote on a constitutional amendment to balance the budget, although it is a weaker version than Republicans voted for in a separate bill last week.

"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," Boehner said on the call, according to GOP officials. He added the agreement was "all spending cuts. The White House bid to raise taxes has been shut down."

Tea party-aligned Senate Republicans appeared to be falling into line. Although they would not support a debt-limit increase, several said they would drop their threat to block Senate action.

But House Minority Leader Nancy Pelosi, D-Calif., was noncommittal, and liberal Democrats decidedly were not dancing. The attention of Congress now will be focused on identifying and carrying out more cuts and not on creating jobs, they said.

'A SATAN SANDWICH'

"On the surface it looks like a Satan sandwich," said Rep. Emanuel Cleaver, D-Mo., the chairman of the Congressional Black Caucus. He said deep spending cuts would devastate the poor and the elderly.

"We believe this whole conversation is going in the wrong direction," said Rep. Keith Ellison, D-Minn., the co-leader of the Progressive Caucus. He said that Medicare is not exempted from the automatic cuts.

Obama said the reductions would result in "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."

The agreement, announced as night fell over the capital, marked the first time the major players were on the same page, though earlier competing proposals by Reid and Boehner shared certain important elements, such as the amount of savings that might be achieved. The final push focused on how the automatic spending cuts and other savings would be triggered if Congress fails to follow through.

As more details came to light late Sunday, it appeared that both sides would win some and lose some.

The deal would allow the debt limit to increase by enough to carry through the 2012 elections, as Obama and Democrats had wanted. But it did not appear that it would include a renewal of extended unemployment benefits that will expire later this year for millions of jobless, which also was on their wish list.

Republicans would win slightly more than a dollar in savings for each dollar in increased borrowing, a key standard that many had set for their support. But provisions dealing with the constitutional amendment for a balanced budget would not be as strong as many had hoped.

The day began with the Senate voting to block a Reid proposal to solve the debt and turning its attention fully to the suddenly promising talks between McConnell and the White House.

Reid said his bill, while blocked, would remain before the Senate. If the new agreement finds support, its language can be swapped into his bill and moved quickly.

In case of a last-minute collapse, Reid has the option to call for a new vote on his measure as a fallback.

The Associated Press and The Washington Post contributed to this story. Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760.