Obama and Leaders Reach Debt Deal

President Obama and Congressional leaders of both parties said late
Sunday that they had agreed to a framework for a budget deal that would
cut trillions of dollars in federal spending over the next decade and
clear the way for an increase in the government’s borrowing limit.

With the health of the fragile economy hanging in the balance and
financial markets watching closely, the leaders said they would present
the compromise to their caucuses on Monday in hopes of enacting it
before a Tuesday deadline to avert default.

Even as the president was speaking from the White House on Sunday night,
Speaker John A. Boehner was on a conference call with House
Republicans, trying to sell them on the proposal he had signed off on
only minutes before.

Since he is likely to lose the most conservative elements of his rank
and file, Mr. Boehner faces the task of framing the pact as friendly
enough to Republican principles to win over a significant group of House
Republicans without alienating Democrats he will need to push it over
the top.

President Obama, in a hastily called appearance with reporters that
ended a day of uncertainty, said that the compromise 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 again in
six months, or eight months, or 12 months,” he said. “And it will begin
to lift the cloud of debt and the cloud of uncertainty that hangs over
our economy.”

Just before Mr. Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.

On Monday morning, the effort on all sides to sell the complex plan to
their wider public constituencies began in earnest. With Mr. Obama
facing much criticism from the left for not pushing harder for tax
increases on the rich, Gene Sperling, a top economic advisor, defended
the deal on MSNBC. He said the deal protected Pell grants for college
students and Medicaid spending, but perhaps more important, did not
allow government to be held “hostage” by a Republican threat of default.

“The president stood firm, never blinked and this agreement reflects that,” Mr. Sperling said.

The tentative agreement calls for at least $2.4 trillion in spending
cuts over 10 years, a new Congressional committee to recommend a
deficit-reduction proposal by Thanksgiving, and a two-step increase in
the debt ceiling.

The announcement concluded a tumultuous 24 hours that saw hopes rise
Saturday night over the prospect of a deal that might have concluded the
budget stalemate. By Sunday, worry set in again as lawmakers and White
House officials struggled to hammer out the fine points of an agreement
that must clear a Senate controlled by Democrats as well as the
Republican House.

If the deal is approved, establishing a special joint committee to
explore deficit reduction, it will ensure that the size and scope of the
federal government and the tension between spending and taxes will
remain front and center in the Washington debate headed into the 2012
election.

Markets reacted favorably to the announcement, with Asian markets
jumping on news of the deal. The Nikkei was up nearly 2 percent in
late-morning trading; the dollar rose against the Japanese yen.

President Obama tempered his comments by noting that “there are still
some very important votes to be taken” and that winning House approval
would be a particular challenge.

On the conference call, Mr. Boehner sought to portray the new agreement
as one heavily tilted toward the Republican call for no new revenue, and
he said it met the goal of instituting cuts greater than the amount of
the debt limit increase. In a presentation, he said the pact would
prevent a “job-killing default” — a warning to lawmakers that failure to
raise the limit could add to the bleak employment picture.

“Our framework is now on the table that will end this crisis in a manner
that meets our principles of smaller government,” said Mr. Boehner, who
said he hoped to get the legislation onto the House floor as quickly as
possible. Participants on the call, which lasted about an hour, said
that the tone was cordial and that lawmakers expressed less resistance
than had been anticipated.

At the same time, Representative Nancy Pelosi of California, the former
speaker and current Democratic leader, was noncommittal about the plan,
suggesting that Democrats might not rally behind it. “I look forward to
reviewing the legislation with my caucus to see what level of support we
can provide,” she said in a written statement.