US & Canada

US debt limit: House votes on last-minute deal

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Media captionHouse leader John Boehner claimed victory for the Republicans

The US House of Representatives has begun voting on a last-minute deal hammered out between the White House and Congress to avoid a debt default.

The package would raise the debt ceiling by up to $2.4tn (£1.5tn) - from $14.3tn - and make budget savings worth a similar amount over 10 years.

A new bipartisan commission would allocate $1.5tn of those savings.

The deal needs to pass both houses of Congress to become law, and elements of both parties are expected to oppose it.

The Senate is expected to vote on the plan on Tuesday.

The US faces a 2 August deadline to raise its debt limit or risk the first full-scale default in its history.

'Sword of Damocles'

Republican and Democratic leaders in the House and the Senate have spent all day trying to convince their own party members to back the bipartisan deal.

Vice-President Joe Biden met congressional Democrats at lunchtime on Monday, emerging from what he called a "good meeting" to say he was confident the bill would pass.

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Media captionVice-President Joe Biden says he is confident a deal will be struck

He described the debt ceiling as a "sword of Damocles".

Earlier the markets responded to the package with relief. The Dow Jones index in New York gained nearly 1% soon after opening, following gains in Tokyo and London - though they later lost ground.

The proposed deal calls for:

  • A debt ceiling increase of up to $2.4tn - enough to last past the 2012 presidential election
  • Government spending cuts of $900bn, split between defence and non-defence spending
  • Bipartisan congressional "super-committee" to recommend $1.5tn of further spending cuts, spread out over 10 years, reporting by November
  • Cuts to key spending areas, including education and defence spending, to be enacted automatically if the committee fails to reach a deal
  • Committee findings would also be put to a vote in Congress

'Satan sandwich'

The most intense debate on the deal was thought likely to come in the House, where divisions were most pronounced.

Republicans elected last November have consistently refused to compromise in the debate over the debt ceiling, with many insisting on deep and immediate spending cuts and a constitutional amendment to force the US to balance its budget.

Many Democrats, meanwhile, strongly oppose the prospect of cuts to social programmes, benefits and healthcare for the elderly or lower-paid.

One Democratic congressman, Emanuel Cleaver, described the deal as "a sugar-coated Satan sandwich" on his Twitter feed.

Shortly before voting began, House Democratic Leader Nancy Pelosi said she would back the bill, after earlier saying she was undecided.

Analysts say there is more consensus in the Senate.

Democratic Majority Leader Harry Reid and Republican Senate leader Mitch McConnell were two of those pushing the plan and they are thought likely to be able to corral their troops to approve the deal. The Senate bill needs a 60-vote bipartisan "supermajority" to pass.

On Monday, Mr Reid said that though "neither side got what they wanted", the agreement was "typical for compromise legislation".

In the 435-seat House the Republicans hold 240 seats, a clear majority. But a number of hardline fiscal conservatives and Tea Party representatives were thought likely to vote against, ensuring a measure of Democratic support needed to pass the package.

Announcing the deal on Sunday night, President Obama himself conceded it was not the one he would have preferred, but called it a "serious downpayment" on the US deficit.

Republican House leader John Boehner - who had negotiated at length with Mr Obama in an eventually fruitless effort to seal a comprehensive deficit-reduction agreement - hailed the deal despite its imperfections.

He circulated a presentation outlining the benefits of the bill from a Republican viewpoint and urged his party members to vote for it.

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Media captionDemocratic and Republican Senators weigh in on the budget plan

In a news conference, Mr Boehner was joined by other top Republicans as they lined up to urge their colleagues to support the plan, while acknowledging it did not meet all of their demands.

"It gives us the best shot that we've had in the 20 years that I've been here to build support for a balanced budget amendment," Mr Boehner said.

On Monday, the Congressional Budget Office (CBO) published its analysis of the deal, saying it would indeed save at least $2.3tn between 2012 and 2021.

Meanwhile, protesters were arrested earlier on Monday outside the House spectators' gallery, which overlooks the House floor.

"Boehner, get off it. It's time to tax corporate profits," demonstrators said.

US 'a parasite'

Democrats and Republicans in Washington have been deadlocked over finding a way to cut spending and raise the debt limit as the deadline loomed.

In recent days Republicans, who control the House of Representatives, and Democrats, who control the Senate, have rejected each others' plans.

Japan, the second-largest foreign holder of US debt after China, hailed the deal. Beijing's state-controlled television called the package "more pomp and ceremony than substance".

Russian Prime Minister Vladimir Putin accused the US of being a "parasite" on the world economy by living through debt.

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