US Congress to pass Wednesday last-ditch deal to avert default

House Speaker John Boehner of Ohio arrives on Capitol Hill, Wednesday, Oct. 16, 2013, in Washington. After bipartisan leaders in the Senate crafted a last-minute deal to fend off a looming US default and to reopen the federal government, Boehner bowed to the inevitable and admitted there were “no reasons for our members to vote no today,” while maintaining that Republicans didn’t like the terms. AP

WASHINGTON—US lawmakers were poised Wednesday to vote to raise the country’s debt limit and re-open the federal government, after an eleventh-hour deal to save Washington from a historic default.

Republican and Democratic senators announced a plan that would stave off the most pressing crisis by extending the US Treasury’s borrowing authority until Feb. 7.

After several chaotic days running up to Thursday’s deadline, the agreement would also immediately open shuttered federal agencies, bringing hundreds of thousands of furloughed employees back to work, by funding government through Jan. 15.

“The compromise we reached will provide our economy with the stability it desperately needs,” Senate Majority Leader Harry Reid said, after working behind closed doors with his Republican rival Senator Mitch McConnell.

According to the White House, President Barack Obama hailed the agreement and urged Congress to act swiftly to ensure that “the government reopens and the threat of default is removed.”

While the deal was welcomed on Wall Street, with the Dow Jones Industrial Average and the broader S&P 500 index up almost 1.4 percent, the signs of a close to humiliating, rushed last-minute bid to avert possible economic turmoil around the world were plain to see.

“I hope that we’re nearing the end of this ordeal, this impasse which never should have happened in the first place,” said Senator Susan Collins, a Republican who has led efforts to broker a compromise.

The bill still needs to pass both chambers of Congress—including an unpredictable House of Representatives—before it reaches Obama’s desk.

Boehner: No reason to vote no

After the agreement was unveiled, House speaker John Boehner bowed to the inevitable and admitted there were “no reasons for our members to vote no today,” while maintaining that Republicans didn’t like the terms.

“We fought the good fight, we did everything we could. They just kept saying no, no, no,” Boehner said of lawmakers in Obama’s Democratic Party.

“Our drive to stop the train wreck that is the president’s health care law will continue,” Boehner added, apparently seeking to placate hard-right Tea Party-backed Republican members who have opposed Obama’s health care reform.

The legislation could pass Congress on Wednesday, allowing the government to borrow beyond its current $16.7 trillion debt ceiling to meet its obligations.

A draft text showed that workers who were asked to stay at home during the shutdown would receive back pay at standard rates.

The US economy has faced unchartered waters during the more than two-week crisis, with the Treasury saying that from Thursday it would no longer be able to borrow more money and avert a devastating debt default.

Confusion on final deadline

In a sign of the confusion, the White House insisted that the final deadline was midnight Thursday—24 hours later than expected by many as the end point for raising the debt limit.

Ratings firm Standard & Poor’s, meanwhile, said the government shutdown had already taken $24 billion out of the economy and will cut growth in the fourth quarter significantly.

Senate leaders hammered out their compromise after previous efforts in the Republican-led House collapsed in chaos Tuesday.

“The American people are tired of where we are,” Senator Kelly Ayotte, a Republican, said. “They’re tired of the brinksmanship, and so they want us to get this resolved now for them—today, hopefully.”

Republican Senators Ted Cruz and Rand Paul, two vocal opponents to the deal, said they would not attempt to delay it further.

“I have no objection to the timing of this vote,” Cruz told reporters.

House conservatives backed by the Tea Party movement have thus far thwarted votes on the debt ceiling and on passing a budget, demanding concessions from Obama.

Democrats have refused to allow Republicans to hold those issues to “ransom” with attempts to slash spending or dismantle the president’s landmark health insurance reform.

But the Senate deal includes a mechanism that forces lawmakers into entering long-term budget negotiations, with recommendations due by December 13.

The stand-off forced the US federal government into a partial shutdown from October 1.

The Fitch ratings agency on Tuesday had underlined the seriousness of the situation by putting the US government’s AAA credit rating on a downgrade warning, and European markets later slid in morning trade.

Major world powers have been left looking on in dismay, unable to do anything to protect their own economic interests, with many deeply invested in US Treasuries — hitherto seen as a safe haven.

China and Japan, which between them hold $2.4 trillion in US Treasuries, have expressed alarm and annoyance at the bitter political partisanship that has caused the weeks-long crisis.—Michael Mathes