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U.S. debt deal passes House

Members of the U.S. House of Representatives passed a crucial debt-ceiling deal Monday night — allowing the country to avert a first-ever default on its loans — in a vote made more dramatic by the appearance of Arizona Democrat Gabrielle Giffords nearly seven months after she was shot in the head.

The vote was 269-161 for the bill, which will now go to the Senate. The magic number for passage in the House was 216 votes.

Democrats had appeared to be holding out en masse to vote at the last minute Monday night, as Republicans began voting in favour of the plan.

But a note of personal drama nearly eclipsed the political theatre surrounding the passage of the emergency bill.

Giffords, who was shot in the head in January, surprised her colleagues by appearing on the House floor for the first time since her critical injury to cast her "yes" vote on the bill.

The sight of a close-cropped and smiling Giffords, who was wounded in a deadly shooting in Tucson in January, delighted fellow lawmakers, who filled the chamber with applause and cheers as she embraced fellow lawmakers.

"I have closely followed the debate over our debt ceiling and have been deeply disappointed at what's going on in Washington," Giffords said in a statement released later.

"I strongly believe that crossing the aisle for the good of the American people is more important than party politics. I had to be here for this vote. I could not take the chance that my absence could crash our economy."

The Republican-run House began considering the debt compromise bill — which would extend the current $14.3 trillion debt limit by up to $2.4 trillion and pare federal spending by more than $2 trillion — less than a day after the White House and top lawmakers reached agreement on a dispute that had locked them in a stalemate for months.

Walking from Capitol Hill after the vote, Republican Speaker of the House John Boehner told CNN his message to Americans was: "The process works. It may not be pretty, but it works."

U.S. President Barack Obama has warned the government will run out of money, causing a setback in the world economy, unless Congress extends its borrowing authority by Tuesday an.

After a tense weekend of bargaining, Obama and congressional leaders announced the agreement Sunday night. The deal provided an instant boost to Asian and European financial markets — though the latter rally fizzled later in the day — and a huge dose of relief to an administration and Congress frazzled by months of partisan warfare and the risk a default could send the still-fragile U.S. economy into recession.

The Senate must still approve the deal before it can become law. Democratic Senate Majority Leader Harry Reid said that vote will be held at noon on Tuesday. It is expected to pass with ease.

"If the bill were presented to the president, he would sign it," the White House said.

Earlier in the day, some Democrats, having received copies of the bill early Monday, were already saying Obama had given away too much to GOP leaders, while a host of Republicans vowed to oppose the legislation.

"Now, is this the deal I would have preferred? No," Obama said. "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."

House Democratic Leader Nancy Pelosi reluctantly gave her official endorsement of the plan on Monday night.

During debate, she said she had reviewed the legislation and said while "it's hard to believe that we're putting our best foot forward with the legislation that comes before us today," she felt Democrats could be satisfied it protected the social safety net.

"I'm not happy with it. But I'm proud of some of the accomplishments contained within it, and that's why I am voting for it."

Pelosi's backing of the deal potentially swayed some Democrats who were still undecided about how they would vote.

Vice-President Joe Biden, who was dispatched to try to get Democrats behind the plan, told reporters at Capitol Hill earlier in the afternoon that he was confident the deal would pass.

"Look, I didn't go to convince. I went to explain, and lay out exactly how we got to where we were, and why this is so important to the country," he said, adding he thought he had "a good meeting" and understood well the frustrations of Democrats over the lateness of the deal.

"I've never asked another person to vote against what they think their interest is. I am confident — my sense is — that they expressed all their frustration, which I'd be frustrated if I were sitting there as well, being taken down to the wire like this."

The bill will slice more than $2 trillion from federal spending over a decade and permit the nation's $14.3-trillion borrowing cap to rise by up to $2.4 trillion, enough to keep the government afloat through the 2012 elections, a key objective for Obama, whose poll numbers have sagged as the summer crisis dragged on.

Boehner characterized the deal as a victory for conservatives.

He noted that two Republican sticking points — that significant long-term spending cuts were necessary and that the cuts must exceed the increase in the debt limit — were both met.

"When you look at what we've been able to achieve, we've met those two standards that have been outlined," Boehner said.

The statement was perceived as a closing argument to sway Republicans to vote for the deal in the House.

Boehner had telephoned Obama mid-evening Sunday to say the agreement had been struck, then immediately began pitching the deal to his fractious rank and file.

"It isn't the greatest deal in the world, but it shows how much we've changed the terms of the debate in this town," he said on a conference call, according to GOP officials. He added the agreement was "all spending cuts. The White House bid to raise taxes has been shut down."

The CBC's Chris Brown, monitoring the brinksmanship in the U.S. capital, said Obama's evening television address to the country capped a day of frantic backroom dealings.

Among the most outspoken lawmakers critical of the deal was presidential candidate Michele Bachmann, a Minnesota representative and favourite of the so-called Tea Party wing of the Republican Party. Bachmann made it clear she would oppose the deal, saying it "spends too much and doesn't cut enough. ... Someone has to say no. I will."

The U.S. government currently borrows more than 40 cents of every dollar it spends, and without an infusion of more borrowing authority, the treasury would face an unprecedented default on its loans and obligations, such as the $23 billion worth of Social Security pension payments to retirees due Wednesday.

The increased borrowing authority includes $400 billion that would take effect immediately and $500 billion that Obama could order unless specifically denied by Congress. That $900-billion increase in the debt cap would be matched by savings produced over the coming decade by capping spending on day-to-day agency budgets passed by Congress each year.

A special bipartisan committee would be established to find $1.5 trillion in further spending cuts, probably taken from benefit programs like farm subsidies, Medicare and the Medicaid health-care program for the poor and disabled. Republicans dismissed the idea that the panel would approve tax increases.

Any agreement by the panel would be voted on by both House and Senate, and if the panel deadlocked, automatic spending cuts would slash across much of the federal budget. Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but Medicare payments could be trimmed.

The final battle before the deal was reached was fought over Pentagon spending cuts, with Democrats emerging with a face-saving victory for $350 billion in defence spending curbs.

Obama said the deal would lead to the lowest levels of government spending as a percentage of the overall economy since the 1950s.

In the end, the deal was a split-the-differences compromise, with plenty for both sides to dislike. House GOP defence hawks came out on the losing end. So too did Democratic liberals seeking tax increases.