Bloomberg reported that the House of Representatives approved the legislation to raise U.S. debt limit by at least $2.1 trillion and cut federal spending by $2.4 trillion or more, one day before a threatened default. Representative Steny Hoyer, the second-ranking Democrat in the House said that, “Default for the United States of America is not an option. This would affect all of the people I represent and all of the people of this country.”
According to CNN report, the agreement revolves around a two-stage process.
The first stage includes $917 billion in savings, including a roughly $420 billion reduction in the national security budget. The cuts would be accompanied by a $900 billion increase in the debt ceiling. Because of the pending Tuesday deadline, President Obama would have immediate authority to raise the debt ceiling by $400 billion, which will last through September, according to the White House.
The remaining $500 billion increase in the debt limit would be subject to a congressional vote of disapproval that can be vetoed by President Obama.
In the second stage, a special joint committee of Congress would recommend further deficit reduction steps totaling $1.5 trillion or more, with Congress obligated to vote on the panel's proposals by the end of the year.
The committee would comprise 12 members: Six from each chamber, equally divided between Democrats and Republicans. The panel's recommendations would be due by November 23 and guaranteed an up-or-down vote without amendments by December 23.
Benefits from entitlements including Social Security, Medicaid, Medicare -- as well as veteran's benefits -- will be exempt from any immediate cuts.
Today, the Senate is scheduled to vote on the same legislation, where it is expected to pass. Without legislation in place by the end of Tuesday, the Treasury will not be able to pay all of its bills which could interrupt payments to investors in Treasury bonds, recipients of Social Security pension checks, anyone relying on military veterans' benefits and businesses that do work for the government. Administration officials say a default would ensue that would severely damage the economy.
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