US House passes Republican debt plan

aljazeera.net

The US House of Representatives has approved a Republican plan to cut the budget deficit, setting up a Senate vote within hours to set aside the bill and begin crafting a compromise acceptable to Democrats.

Republicans pushed their deficit-cutting plan through by a vote of 218-to-210 after the leadership reworked the bill to win over anti-tax conservatives in their ranks.

The revised Republican plan passed on Friday includes tougher requirements on Congress to pass a balanced budget amendment to the Constitution and send it to the states for ratification, a long-time core demand of conservative Republicans who say it is the only way to control spending.

The two-step plan would cut spending initially by about by about $900 billion and lift the debt ceiling only enough to last a few months.

The Republican legislation, sharply criticised by President Barack Obama, faces certain death in the Democratic-controlled Senate, where all Democrats have vowed to vote against it later on Friday.

Working on compromise formula

Top Senate Democrat Harry Reid has said a short-term solution is unacceptable and is pushing his own bill that would cut $2.2 trillion in spending over 10 years.

Reid's plan is expected to be amended to make it more palatable to moderate Republicans in the House, and with Democratic votes offset the inevitable loss of support from anti-tax Tea Party-aligned Republicans.

But the passage of the bill breaks weeks of political inertia and opens the door to talks on a compromise that could pass Congress before Tuesday, after which the government says it will be unable to pay all of its bills without a deal.

If a compromise is worked out, a final vote in the Senate could take place as early as Monday or by midday on Tuesday, a Senate Democratic aide told Reuters.

The delays make it impossible for Congress to strike a deal and send it Obama's desk until the 11th hour, injecting a dangerous level of uncertainty into already rattled financial markets. A late deal also raises the prospect that the United States will lose its top-notch AAA credit rating.

Administration officials say Congress must find a compromise to raise the debt ceiling by Tuesday or the government will run out of cash to pay its bills. That could prompt an unprecedented federal default, which could rattle the economy.