Obama and Leaders Reach Debt Deal

WASHINGTON — President Obama and Congressional leaders of both parties said late Sunday that they had agreed to a framework for a budget deal that would cut trillions of dollars in federal spending over the next decade and clear the way for an increase in the government’s borrowing limit.

With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday morning in hopes of averting a default before a Tuesday deadline.

President Obama spoke from the White House on Sunday night, telling reporters that “the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid a default.”

Just before Mr. Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.

“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach a historic, bipartisan compromise that ends this dangerous standoff,” said Mr. Reid, the majority leader.

The agreement came after a day of wrangling over Pentagon cuts, and it still must be sold to the Senate and the House, with the House providing a particular challenge.

As conversations flowed between the White House and Capitol Hill, Mr. Reid publicly embraced the compromise that would tie deep spending cuts to a debt increase, though his plan to bring it to a vote as early as Sunday were put off, as was a tentative meeting of Senate Democrats to review it.

According to Congressional and administration officials, the delay was attributable to efforts by Speaker John A. Boehner, Republican of Ohio, to limit immediate reductions in the Pentagon budget and better protect it from future cuts in order to cement votes from defense hawks. He needs those votes to win approval of the plan in the House.

While architects of the compromise stopped short of declaring they had a final agreement, a framework had emerged calling for at least $2.5 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.

The tense, last-minute negotiations were taking place against a backdrop of uncertainty, with a looming threat of a costly downgrade of the nation’s credit rating and with investors worried about the global economic impact of a possible default. The political stakes were unusually high as well, with leaders in both parties staking out positions that may well be central to their re-election chances in 2012.

If the compromise were to be nailed down, attention would immediately turn to selling it to the rank-and-file. The leadership was anticipating objections from Republicans that the plan did not go far enough while Democrats were wary that Medicare spending would take a hit.

Despite the remaining political and procedural hurdles, the predominant mood on Capitol Hill was one of cautious relief that the gears were turning to produce legislation that would eliminate the threat of a potential government default after Tuesday.

Referring to the tortuous negotiations, Senator Dianne Feinstein, Democrat of California, said: “Sausage making is not pretty. But the sausage we have, I think, is a very different sausage from when we started.”

She noted that the proposed caps on federal spending, combined with creation of a new evenly divided panel to cut the deficit further, could fundamentally change federal finances.

But not everyone was pleased. “It may be the best we can do,” said Senator Jeff Sessions of Alabama, the senior Republican on the Budget Committee. “But I do not think it’s enough.”

With the talks appearing to make progress, the Senate blocked a Democratic proposal for a debt limit increase on a vote 50-49, falling 10 votes short of the 60 required to limit debate. But all attention was on the negotiations.