President Obama: Deal Reached On Debt Crisis

President Obama announced on Sunday night that an agreement with Republicans has been struck to raise the debt ceiling.

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By CBS/AP

Story Created: Jul 31, 2011 at 6:48 PM AKDT

Story Updated: Jul 31, 2011 at 6:48 PM AKDT

President Obama announced on Sunday night that an agreement with Republicans has been struck to raise the debt ceiling, preventing what would have been a first-ever default by the U.S. government on its financial obligations. The agreement now awaits approval by Congress, which could happen as early as Monday.

The deal would increase the debt ceiling by more than $2 trillion in two stages which will last through the 2012 election, a key demand for Mr. Obama and Democratic leaders.

As for spending cuts, about $1 trillion over 10 years would be cut now from the federal budget. In addition, a new special congressional committee made up of members from both parties and both houses of Congress would be tasked with coming up with $1.8 trillion in cuts by Thanksgiving. If the committee failed to reach the target, or Congress didn't pass the recommendations by the end of 2011, Congress would vote on a balanced budget amendment to the Constitution, a key demand for many conservatives in the debt fight.

If the amendment fails, the deal calls for automatic spending cuts to defense and domenstic programs totalling $1.2 trillion, with an accompanying debt limit increase.

"Is this the deal I would have preferred," Mr. Obama asked during his remarks. He answered his question: "No."

But he still backed the deal, saying: "Most importantly it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. And it will allow us to lift the cloud of debt and uncertainty."

Mr. Obama said the deal will result in the lowest level of domestic spending since the Eisenhower administration in the 1950s, but still allow the U.S. to create jobs.

Still clinging to his idea of a balanced approach, Mr. Obama said "we have to ask wealthiest Americans to give up tax breaks," as well as make modest adjustments to entitlement programs like Medicare and Medicaid.

It is unclear how much support the agreement has in the highly divisive House of Representatives, where tea parties and liberal democrats have been clinging to their pet issues of spending cuts and tax increases for the rich, respectively. Both wings of the two parties have said in recent days they would not vote for the agreement Obama mentioned above.

House Speaker John Boehner was scheduled to have a conference call with Republicans just as Mr. Obama announced the agreement on the deal. It should also be noted that Asian financial markets, which many had predicted would react negatively to a lack of a debt deal, opened just as Mr. Obama took to the podium.

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Abre said on Monday, Aug 1 at 8:10 PM

I'm sure Marky-Mark didn't read this bill either before he voted, so any comment he or Lisa have are irrelevant.

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