A deal worked out among top congressional leaders and the White House would enable the U.S. government to keep borrowing money but may cost President Barack Obama critical support among liberal Democrats.
The agreement to immediately raise the government's debt ceiling, and enact already agreed-on spending cuts of about $1-trillion, would avert the financial turmoil that had been feared if Congress failed to raise the $14.3-trillion (U.S.) borrowing limit by Tuesday's deadline. The threat of a U.S. default has effectively been lifted.
And while the deal struck Sunday would spare the President from having to wage another protracted debt-ceiling battle as he campaigns for re-election in 2012, liberal Democrats are livid at him for giving in to Republicans on most other counts.
"Is this the deal I would have preferred? No," Mr. Obama conceded from the White House briefing room as he announced the agreement shortly before 9 p.m.. But he added it "would allow us to avoid default and end the crisis that Washington has imposed on the rest of America."
The pact must first be approved by Congress and party leaders are still scrambling to cobble together enough votes in the Senate and House of Representatives. Congress could authorize a temporary measure allowing the government to pay its bills until final legislation passes both chambers.