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President Obama Announces Debt Deal

9:25 p.m. ET | President Obama announced Sunday evening that he had reached an agreement with party leaders in Congress that will cut the deficit, raise the debt ceiling and create a bipartisan, bicameral committee of members of Congress to identify further deficit cuts.

The deal will cut $1 trillion from the deficit over ten years and allow President Obama to raise the debt ceiling in a series of steps that Congress could then vote against, but they would need a likely unattainable two-thirds majority in both chambers to reject the debt limit increase.

The deficit reduction committee must identify a way to cut at least an additional $1.5 trillion from the deficit over the next ten years and then send that proposal to Congress by the end of the year. If it does not pass, there will be a series of automatic cuts in Medicare and defense and non-defense domestic spending. This measure is meant to force the committee to reach a workable agreement.

“Is this the deal I would have preferred? No. I believe that we could’ve made the tough choices required on entitlement reform and tax reform right now, rather than through a special Congressional committee process. 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,” President Obama said.

“Most importantly it would allow us to avoid default and end the crisis that Washington imposed on the rest of America. It ensures also that we will not face this same kind of crisis in six months, or eight months or 12 months.”

President Obama urged members of Congress to support the deal, but that support is not guaranteed. House Speaker John Boehner, R-Ohio, held a conference call Sunday evening to sell the deal to House Republicans. He used this slide show to make his case.

The Senate will also have to vote to pass the plan, but the math is more uncertain in the House, where Democratic votes will be needed to pass a bill that some conservative Republicans will likely reject. The deal must be passed in both chambers before 12 a.m. Wednesday in order to avoid a default on the debt and an overnight reduction of 40 percent of government spending.

6:45 p.m. ET | Senate Majority Leader Harry Reid has given his support to a possible debt deal that could be voted on as early as Sunday evening, pending meeting with members of his caucus. Earlier Sunday Minority Leader Mitch McConnell expressed optimism that the two sides could reach a deal in the near future. House Speaker John Boehner has not yet publicly endorsed the latest agreement.

1:40 p.m. ET | The Senate blocked a final vote on Senate Majority Leader Harry Reid’s original debt limit bill Sunday afternoon, while negotiations over a final deal continue among congressional leaders and the White House.

Sen. Reid’s bill will be used as the legislative vehicle to enact whatever deal might be reached. Reid said he was confident a deal could be reached, but that it was not done yet.

The measure needed 60 votes to proceed, but the vote was 50 to 49.

11:05 a.m. ET update from David Chalian | A deal between President Obama and bipartisan congressional leaders on raising the nation’s debt limit and averting the risk of default appears to be at hand.

According to congressional leaders of both parties and senior White House officials, the finishing touches on an agreement to reduce the deficit and raise the debt ceiling before a Tuesday deadline are being hammered out Sunday morning with an expected agreement slated to receive a vote in the Senate in the afternoon.

“I think we are very close…to being in a position where I can recommend to my members that this is something I hope they will support,” Senate Minority Leader Mitch McConnell, R-Ky., said on CBS’ “Face the Nation” Sunday morning.

Details of the framework of the deal have not been released, but according to reports the agreement is expected to reduce the deficit by $2.5 – $3 trillion over 10 years through spending cuts, and will happen in two stages.

If the deal becomes law, there will be an immediate $1 trillion — over 10 years — in spending cuts enacted, and the debt limit will be raised through 2012, which is a key requirement President Obama said would have to be met to get his signature on the bill.

The deal would also set up a Joint Congressional Committee of six Democrats and six Republicans to come up with the additional $1.5 – $2 trillion in deficit reduction, likely through a mix of discretionary spending cuts, including defense spending, entitlement reform, and tax reform to produce increased revenues.

The Joint Committee’s work would be required to be completed by the Thanksgiving recess and would get an automatic clean up-or-down vote in both the House and the Senate.

The last-minute work on hammering out a deal to raise the debt limit is primarily focused on how to enforce the second round of deficit reduction if the Joint Committee plan fails to get majority votes in each chamber.

“We’re talking about a variety of different options here in the closing hours here about how to compel that action,” Obama senior adviser David Plouffe said on ABC’s “This Week with Christiane Amanpour.” “I would say that the positive thing is — I think both parties agree that you need such an action.”

“And exactly what the composition is — again, we want to make sure that there’s focus on this committee acting. And I think this has been a healthy debate. I think the American people understand a lot more about the deficit, about that there’s no easy answers. I think it’s been a healthy debate here in Washington. And I think any long-term deficit reduction is going to include revenues and smart entitlement reform,” Plouffe added.

10:25 a.m. ET | Senate Minority Leader Mitch McConnell, R-Ky., said Sunday on CNN’s “State of the Union” that the two sides are “very close” to a $3 trillion debt limit agreement that would raise the debt limit through 2012, two days before the Aug. 2 default deadline. Sen. Chuck Schumer, D-N.Y., said there was “relief” on Capitol Hill as both sides continued to make strides in negotiations.

U.S. Capitol; Jewel Samad/AFP/Getty Images Photo of U.S. Capitol by Jewel Samad/AFP/Getty Images

10:28 p.m. ET | Late Saturday night, after hours of debate in the U.S. Senate and behind closed doors over how to solve the debt-limit crisis, Senate Majority Leader Harry Reid, D-Nev., postponed until 1 p.m. ET Sunday a vote to end debate on his debt-limit bill. It was originally scheduled for 1 a.m.

“There are negotiations going on at the White House now on a solution that will avert a catastrophic default on our nation’s debt. There are many elements to be finalized, many elements to be finalized. There is still a distance to go before any arrangement can be completed. But I believe we should give everyone as much room as possible to do their work. I’ve spoken to the White House quite a few times this evening. They’ve asked me to give everyone as much time as possible to reach an agreement if one can be reached,” Reid said on the Senate floor.

Reid said he was confident that an agreement could be reached and reiterated his position, which is shared by the White House, that there would be no short-term debt ceiling increase. Reid and the White House favor increasing the debt limit past the 2012 elections.

Reid and the Democrats have been searching for seven Republicans to join their side and allow a vote on the Reid measure to go forward. But his bill was already defeated in a vote in the House of Representatives Saturday, and the delay in the vote means Reid and leaders of both parties in the House and Senate are still working on a new compromise to raise the debt ceiling before 12 a.m. Aug 3. If an agreement is reached, his bill could be amended to reflect that agreement and allow for passage in the Senate and then sent to the House.

6:39 p.m. ET | Senate Majority Leader Harry Reid, D-Nev., rejected the idea that a deal was close at hand on the Senate floor Saturday evening. He had just returned from a meeting at the White House.

“I just spent two hours with the president and the vice president, and the Republicans still refuse to negotiate in good faith. [They say] revenues are off the table. No way we can talk about revenues. Entitlements, oh, they’re after entitlements — Medicare, Social Security. The speaker and Republican leader should know that merely saying you have an agreement in front of television cameras doesn’t make it so,” Reid said.

The Senate is scheduled to vote to end debate on Reid’s debt limit bill at 1 a.m. ET Sunday.

4:30 p.m. ET | Senate Minority Leader Mitch McConnell, R-Ky., said Saturday afternoon that he had been in contact with President Obama and Vice President Joe Biden within the last hour on how to end the debt limit crisis and that he thinks they are close to reaching a solution.

“I’m confident and optimistic that we are going to get an agreement in the very near future and resolve this crisis in the best interest of the American people,” McConnell said at a news conference with House Speaker John Boehner.

Asked by a reporter why they are confident they will reach an end to the crisis, Boehner had positive things to say about the White House.

“In spite of our differences I think we are dealing with reasonable responsible people who want this crisis to end as quickly as possible and I’m confident that we will,” Boehner said.

McConnell elaborated:

“Our country is not going to default in the first time in history. That is not going to happen. We now have I think a level of seriousness with the right people at the table that we needed and thought we had…last weekend. We’re going to get a result.”

3:30 p.m. ET | The House of Representatives did not pass a hybrid debt limit bill authored by Senate Majority Leader Harry Reid in a largely symbolic vote meant to show that Reid’s bill, as written, cannot pass in the House chamber.

As the bill failed, news broke that Reid was headed to the White House Saturday afternoon to meet with President Obama to discuss a path forward. Congress has until 12 a.m. on Aug. 3 to raise the debt ceiling or face potentially dire economic consequences.

Sens. Harry Reid, D-Nev., and Mitch McConnell, R-Ky. Photo by Alex Wong/Getty Images

Because the bill was considered under special circumstances it needed yes votes from two-thirds of members to pass, but it failed by a vote of 173-246. Eleven Democrats voted against it.

The bill would cut spending by $2.4 trillion over 10 years and give President Obama the authority to raise the debt ceiling by $1.2 trillion at two separate times. Congress would be able submit a vote of disapproval on that debt limit increase, but it likely would not be able to garner a two-thirds vote to prevent a debt limit increase. This approach represents an idea presented by Senate Minority Leader Mitch McConnell, R-Ky.

The Reid plan is also stalled in the Senate. McConnell and 42 other Republican Senators have signed a letter opposing the Reid plan, while four moderate Republican Senators did not sign it. The Senate will hold a vote to end debate on the measure Sunday at 1 a.m. ET. The Senate will not be able to proceed to a vote on the Reid bill unless at least 60 senators agree to end debate.

“This bill has one goal: to get the president through his next election without having to have another national debate about the consequences of his policies,” McConnell said in a statement Saturday. “It isn’t going anywhere.”

Reid on Saturday called for McConnell to work with him on a new path forward and hinted that some Senate Republicans wanted to work toward a compromise.

“I appreciate that several of my Republican colleagues have reached out to me over the last few hours, hoping to reach a compromise. Senate Democrats welcome their input and look forward to working with them on a path forward. But my friend, the Republican leader of the Senate, must come forward as well,” Reid said in a statement. “The two parties must work together to forge an agreement that preserves this nation’s economy. We will need the help of reasonable Republicans — including Sen. McConnell — to get this done.”

Photo by Alex Wong/Getty Images

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