WASHINGTON Congressional leaders rushed to line up Republican and Democratic votes on Monday for a White House-backed deal to raise the U.S. borrowing limit and avert an unprecedented debt default.
With scars still fresh from the months-long debate over increasing the $14.3 trillion debt ceiling, a new battle was shaping over the incendiary topic of taxes.
Votes were expected later in the day in the House of Representatives and Senate on a plan to cut at least $2.4 trillion over 10 years, form a new congressional committee to recommend a deficit-reduction package by late November, and raise the borrowing limit through 2013.
Global markets showed signs of relief on Monday after becoming unnerved in recent days by the bitter deadlock in Washington. Without a deal by Tuesday, the United States, the world's largest economy, would start running out of money to pay its bills.
U.S. stocks rose more than 1 percent at the open on Monday, while the U.S. dollar rose modestly against the yen and the Swiss franc, a favored safe haven for nervous investors in recent weeks.
The Democratic-led Senate is expected to pass the deal, but it may face a harder path in the House of Representatives where both conservative Tea Party supporters and liberal lawmakers have expressed dissatisfaction with the agreement.
But with the clock ticking away to the Tuesday deadline, there was a general feeling that the legislation would be approved and sent to President Barack Obama for his signature to finally close out a rancorous, partisan debate that left both sides fuming in the summer heat.
Congressional leaders were consulting their membership to determine who would vote for the deal and who would be against it. Liberals have vowed to oppose it out of concern it would cut spending for popular social programs, while conservatives want deeper cuts.
Vice President Joe Biden planned to attend Democratic meetings in the House and Senate, his office said on Twitter.
While the deal means the United States is unlikely to default, it is far from certain whether the plan agreed by the White House and lawmakers goes far enough in reducing the deficit to appease credit ratings agency S&P, which has threatened to strip America of its top-notch AAA rating.
TAX FIGHT AWAITS
Taxes looked to be one of the next battlefields.
While the framework of the new deficit reduction plan does not call for new taxes, Democrats see the new congressional committee being formed as a vehicle for gaining new revenues through a reform of the tax code.
House Speaker John Boehner, the top Republican who is seeking to bring restive, anti-tax Tea Party conservatives behind the deal, vowed on Sunday night that the deal is "all spending cuts."
"The White House bid to raise taxes has been shut down," he told House Republicans.
The White House sees the issue otherwise. If tax reform does not succeed in the new committee, President Barack Obama will allow tax cuts put forward by former President George W. Bush to expire in 2013, White House officials said.
White House senior adviser David Plouffe insisted that new tax revenues were on the table.
"I think that's the case the president's going to make, that if we're going to do additional deficit reduction in the fall, it should be tax reform, closing loopholes for the wealthy and big corporations," he told NBC's "Today" show.
(Additional reporting by Jeff Mason and Thomas Ferraro; Writing by Steve Holland, Editing by Jackie Frank )