WASHINGTON — President Barack Obama and congressional leaders reached agreement late Sunday to cut federal deficits by trillions of dollars over the next decade while likely ensuring that the nation's debt limit will be raised before Tuesday's deadline - averting a possible economic crisis.
Congressional leaders said they would present details of the deal to their party members today and were confident that both houses would approve the compromise before Tuesday night, when the nation's $14.3 trillion debt limit must be increased.
"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," Obama said Sunday night. "Most importantly, it will allow us to avoid default and end the crisis Washington imposed on the rest of America."
The first part of the agreement will cut nearly $1 trillion in federal spending over the next decade, Obama said, while a special legislative committee will look for more cuts. "Everything will be on the table," he said.
Obama spoke as financial markets opened in Asia - Japan's Nikkei index had climbed nearly 2 percent within an hour of his remarks - and eased fears that the United States would default on its debt and perhaps slip back into recession.
The agreement, forged after weeks of unusually intense, often personal Washington drama, still needs congressional approval, and lawmakers signaled Sunday that they wanted to learn details of a plan that was hammered out at the 11th hour.
Senate leaders quickly had warm words for the agreement.
"I know this agreement won't make every Republican happy. It certainly won't make every Democrat happy, either," said Senate Majority Leader Harry Reid of Nevada, who signed off on the deal subject to approval of his caucus.
"Both parties gave more ground than they wanted to. And neither side got as much as it had hoped. But that is the essence of compromise. And the American people demanded compromise this week."
Senate Republican Leader Mitch McConnell of Kentucky also praised the agreement. "I think I can say with a high degree of confidence that there is now a framework to review that will ensure significant cuts in Washington spending," he said. "And we can assure the American people tonight that the United States of America will not for the first time in our history default on its obligations."
Congressional leaders spent Sunday in a whirlwind of phone calls, meetings and deliberations, as several scenarios describing deals came and went.
Democratic and Republican negotiators' chief dispute was over creation of a system for assuring future deficit reduction.
But they agreed on several key points:
Spending cuts of $900 billion over 10 years on discretionary items - primarily education, housing and transportation programs that Congress can more easily control. The cuts could pare such programs back to levels of years ago. Defense would be cut $350 billion.
No tax increase, although overhauling the tax code would be part of future deficit reduction efforts. Any automatic cuts would start on Jan. 1, 2013, the same day the Bush tax cuts are due to end. Though that suggested the Bush tax cuts could be negotiable, a senior administration official left no wiggle room, saying Obama "is not going to sign something that extends the Bush tax cuts for the wealthy."
A new 12-member, bipartisan legislative committee to recommend further spending cuts, with the goal to come up with $1.5 trillion. If it fell short, the rest would be made up with automatic spending cuts, about half from defense and the rest from non-defense programs. Social Security, Medicaid, unemployment insurance and civilian and military retirement would be exempt. Medicare cuts would be restricted to provider payments, and would be limited.
A multistep debt limit increase, with the first $400 billion increase to go into effect immediately. A $500 billion increase would take effect this fall, unless Congress rejected it - although that's unlikely because even if lawmakers said no, President Barack Obama is likely to veto the action and Democrats would have the numbers to sustain the veto.
A third increase of $1.5 trillion - expected to be enough to get through next year - would occur after the committee's action, or the automatic cuts, went into effect.
Reflecting skepticism of the deal in some quarters, members of the Congressional Black Caucus and the Congressional Progressive Caucus were expected to urge Obama today to invoke the 14th Amendment and bypass Congress to raise the debt ceiling.
The two liberal groups are concerned about the extent of the proposed spending cuts in the deal.
Disagreements about the bipartisan committee reportedly held up the final agreement, as well as questions over whether House leaders could get Republican rank-and-file members, including conservative tea party favorites who have opposed raising the debt limit, to go along.
House Republicans on Friday passed a deficit-cutting measure that would require a balanced budget amendment to the Constitution be adopted by Congress before the larger debt limit increase would take effect.
But the automatic cut provision was seen as a compromise that both parties could accept.
With the threat of automatic cuts - Democrats have railed against cutting Medicare while Republicans have been adamant about not slashing defense spending too deeply - the joint committee would be motivated to find savings on its own.
The multistage debt limit increase represents a concession by Democrats. They had sought one vote on raising the $14.3 trillion limit, which likely would have meant no more such votes until after the 2012 presidential election - and deprived Republicans of another round of showdowns over the volatile issue.