ABC News’ Z. Byron Wolf (@zbyronwolf) reports:
It took the threat of economic collapse and a long, contentious negotiation — and there will still be votes in Congress before it’s truly done — but lawmakers from both parties and the White House have reached a deal to raise the nation’s credit limit — the $14.3 trillion debt ceiling — by $2.4 trillion, likely through 2012.
President Obama made a hastily arranged address from the White House at 8:40 p.m. at the same time House Speaker John Boehner was pitching the deal to House Republicans on a conference call.
“This will allow us to avoid default, allow us to pay our bills,” the president said, describing the process that led to the deal as “messy” and taking too long.
On the senate floor, Minority Leader Mitch McConnell appeared alongside Majority Leader Harry Reid and seemed confident that the deal would gain enough support to pass through Congress.
“We can assure the American people tonight that the United States of America will not for the first time in our history default on its obligations,” he said.
Boehner told House Republicans, according to an account released by his office, that the framework he and the president have agreed upon is true to the principles of small government because it relies entirely on spending cuts, although it includes promises of entitlement and tax reform in the future.
“I’m going to tell you, this has been a long battle -– we’ve fought valiantly -– and frankly we’ve done it by listening to the American people,” Boehner said. “And as a result, our framework is now on the table that will end this crisis in a manner that meets our principles of smaller government.”
The bipartisan compromise welled up behind the scenes after a weekend of angry floor speeches and votes in the senate to kill opposing partisan plans.
“I am relieved to say that leaders of both parties have come together for the sake of our economy, to reach a historic bipartisan compromise, that ends this dangerous standoff,” Reid tonight on the Senate floor.
But no one is likely to be entirely happy with the framework leaders have presented. Republicans will gripe that it does not cut spending enough. Democrats will gripe that it does not include increased taxes — revenue — to off-set the severity of the spending cuts.
Boehner, who had trouble passing his own plan through the House last week, can expect to lose many Republican votes when the House considers the framework early this week. He will have to rely on help from Democrats to get it passed.
House Minority Leader Nancy Pelosi issued a terse statement that she would be reviewing the framework.
“I look forward to reviewing the legislation with my Caucus to see what level of support we can provide,” she said.
And in the senate, there is bound to be opposition too, both among Republicans and Democrats.
Independent Bernie Sanders has already announced his opposition.
“I cannot support legislation like the Reid proposal which balances the budget on the backs of struggling Americans while not requiring one penny of sacrifice from the wealthiest people in our country,” he said. “That is not only grotesquely immoral, it is bad economic policy.”
Many conservatives believe the U.S. should not raise the debt ceiling at all, doubting the severity of the economic fallout if the U.S. were unable to pay all its bills and had to pay higher interest rates for everything else.
“Everywhere I travel across the country, Americans want less spending, lower taxes to create jobs, and they don’t want us to raise the debt ceiling,” said Rep. Michele Bachmann, R-Minn., who is running for the Republican presidential nomination.
But her party leaders in Washington pledged along with Democrats not to let the government default and worked hard over the past months to find a bipartisan way forward.
The final product, which still has to overcome difficult votes in the House and Senate, will raise the debt ceiling enough to last a year and a half. That borrowing authority will come in shifts – first $900 billion and, next year, $1.2 trillion. Congress will have the opportunity to vote its disapproval, but the president will be able to issue a veto and borrow the full funds anyway. The framework mandates more than $1 trillion in immediate funding cuts, although specifics are not yet determined. Going forward, it will set up a bipartisan Congressional committee that will recommend by November, how Washington can cut an additional $1.5 trillion in spending. If that proposal is not successful later this year, an additional $1.5 trillion in spending cuts will automatically be triggered.
The cuts will come from all parts of the federal government, including normally sacrosanct defense spending. They would be evenly split between defense and domestic spending, although programs for the poor, Medicare and Social Security would be exempt.
Congress has until December 23 to vote on the recommendations of the deficit reduction committee. If they fail to pass something to systemically deal with the deficit, the new cuts would take effect in early January.
There is an open question whether the proposal will do enough to satisfy credit rating agencies, which had said the U.S. could lose its favored AAA bond rating without a systemic reform package. Boehner and Obama cut off negotiations for that kind of proposal — aimed at changing the way the country taxes and taxes care of its citizens — more than a week ago.
But on news of this more modest deal, overseas markets already open shot up. Japan’s Nikkei rallied more than 1.1 percent in the first few minutes of trading.
Futures contracts currently show up more than 1 percent for U.S. markets based on what seems to be happening in D.C. now.
With reporting from ABC’s Jake Tapper, Jonathan Karl and Dan Arnall.