US senate due to vote on debt deal

The US senate is due to vote on a bill that raises the country’s borrowing limit and averts a possible default, after the lower house of congress approved it following weeks of political wrangling.

The passage by the Republican-controlled House – a day before the deadline to lift the debt ceiling – of the $2.1tn deficit-cutting plan reached over the weekend clears the way for the senate to approve it on Tuesday.

The vote in the senate is virtually guaranteed to pass the bill, with Harry Reid, the Democratic majority leader, and Mitch McConnell, the Republican minority leader, both backing it.

The vote is expected to take place at noon local time (1600 GMT), and Barack Obama, the US president, has said he will sign it into law immediately afterward.

The bill raises the borrowing limit into 2013, calls for spending cuts spread over 10 years and creates a congressional committee to recommend a deficit-reduction package by late November.

It does not spell out where the spending cuts should be made and instead puts off decisions about which programmes will bear the brunt in the future. And it contains no immediate tax increases.

Partisan battle

The House vote of approval on Monday had been considered the biggest obstacle to a solution of the crisis.

It signalled the end was in sight to a months-long partisan battle that had deadlocked the political system of the US, alarming its international allies, shaking financial markets and diminishing America’s global image.

The bill passed in the House by 269 votes to 161, well over the required majority.

Democrats were evenly split on the bill – 95 for, 95 against – while 174 Republicans voted for the measure, with 66 opposing it.

Speaking to Al Jazeera from Los Angeles, Richard Eskow, a senior fellow at the Campaign for America’s Future, a US think-tank, said: “This is an all cut no tax increase programme which is why Republicans voted by a three-quarter majority for it, while Democrats only voted fifty-fifty for it.”

“Enormous amount of cuts, but no tax increases for the wealthy and no closing of corporate loopholes.”

Representative Gabrielle Giffords, an Arizona Democrat who was badly injured in a January shooting, made a surprise appearance on the House floor to vote for the bill, drawing applause.

Up to the last minute, financial markets worldwide had been rattled by uncertainty over whether the plan could pass the House in the face of objections from conservative Tea Party Republicans and from liberal Democrats.

Jay Carney, the White House spokesman, said that the cloud of uncertainty over the US economy is lifting but he was critical of the time it has taken to achieve.

“This was a mess, there is no question. It was a circus at times,” he said.

“We unnecessarily sent the message around the country and the globe that the United States might, in fact, default on its obligations for the first time in its history.”

Torturous months

After the vote, House Speaker John Boehner, the most senior Republican in congress, said the end result justified the often torturous months of negotiations. “The process works. It may not be pretty, but it works,” he said.

Having a deal in place to raise the US government’s $14.3tn borrowing limit will remove the risk of the US not being able to borrow money to pay all of its bills.

But concern now shifted to whether the deal and the hard-fought compromises that forged it would be enough to keep influential credit ratings agencies from the unprecedented step of downgrading the top-notch US credit rating.

Healthcare stocks, including United Health, were among the worst performers on Wall Street as investors feared the debt-ceiling deal could lead to cuts in Medicare and other federal health programmes, analysts said.

Timothy Geithner, the US treasury secretary, said on Tuesday that while it was “not [his] judgment to make” regarding whether the credit rating agencies would downgrade US debt, the process of raising the debt ceiling had been a “a judgment on the capacity of Congress to act”.

He went on to say that while the result had been “good”, the process had been “terrible”.

“I think as the world watched congress step up to the edge of the abyss, it made them really wonder whether this place can work. But this is a good deal. It’s a good agreement,” he told ABC news.

Vladimir Putin, the Russian prime minister, meanwhile, described the US as “a parasite on the world economy”  during comments made on Monday, referring to the possible implicaitons of a debt default on other economies.

“The [US]  lives on credit, and this for one of the leading economies of the world is very bad. This means they live beyond their means and shift part of the load of their problems onto the whole world economy. To a certain extent it is a parasite on the world economy and on its monopolistic dollar state,” he told a group of young people at the annual Seliger forum.