Ending a perilous stalemate, President Barack Obama and congressional leaders announced a historic agreement Sunday night on emergency legislation to avert the nation's first-ever financial default.
The dramatic resolution lifted a cloud that had threatened the still-fragile economic recovery at home — and it instantly powered a rise in financial markets overseas.
The agreement would slice at least $2.2 trillion from federal spending over a decade, a steep price for many Democrats, too little for many Republicans. The Treasury's authority to borrow would be extended beyond the 2012 elections, a key objective for Obama, though the president had to give up his insistence on raising taxes on wealthy Americans to reduce deficits.
The deal, with scant time remaining before Tuesday's debt-limit deadline for paying government bills, "will allow us to avoid default and end the crisis that Washington imposed on the rest of America," the president said in an announcement at the White House.
Default "would have had a devastating effect on our economy," he said.
House Speaker John Boehner telephoned Obama at mid-evening 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 House Democratic leader, Rep. Nancy Pelosi, was noncommittal. "I look forward to reviewing the legislation with my caucus to see what level of support we can provide," she said in a written statement.
Many economists have expressed concerns that the spending cuts could threaten an already feeble economic recovery. The first half of 2011 marked the worst six-month economic performance since the Great Recession officially ended in June 2009.