Monday, July 18, 2011

Bi Partisian Compromise on Debt Ceiling Emerges

With just two weeks to avert a catastrophic debt default, top US senators forged ahead Monday with a bipartisan compromise effort as the White House's Republican foes set up symbolic votes on an austerity plan.

The blueprint, described last week by aides who warned it was still in flux, would effectively let Obama raise the debt ceiling with just Democratic votes while letting Republicans oppose the move with political but few practical consequences.

The plan would also call for as much as $1.5 trillion in spending cuts over ten years and set up a special commission of lawmakers empowered to propose more cuts that would get streamlined congressional consideration.

Treasury Secretary Geithner praised a plan being forged in private by Democratic Senate Majority Leader Harry Reid and Republican Senate Minority Leader Mitch McConnell that would give President Barack Obama broad powers to raise the debt ceiling.

Geithner acknowledged that the plan would leave Obama with the political "responsibility" for any unpopular debt limit increase and would "make it sure that politics can't stand in the way of sensible fiscal reforms."

A new poll showcased deep US public disgust with politicians' handling of the standoff. Obama, whose 2012 reelection bid will turn on his handling of the US economy, won good marks from just 43 percent of the US public for his approach to the debt standoff, while 48 percent disapproved, according to a CBS television poll. But he fared better than Republicans, who faced 71 percent disapproval to just 21 percent approval for their role in the political struggle, according to the survey, which had an error margin of plus or minus four percentage points. 

Finance and business leaders have warned that failure to raise the US debt ceiling by August 2 could send shock waves through a world economy still reeling from the 2008 collapse, while Obama has predicted economic "Armageddon."

Ratings agencies Moody's and Standard & Poor's have warned they may downgrade Washington's top Triple-A debt rating, and leading US creditor China, Wall Street titan JPMorgan Chase and the Federal Reserve have also sounded the alarm.

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