Washington: Senate leaders announced a bipartisan deal on Wednesday to avert a threatened US default and reopen the federal government after a 16-day closure.

It's a move intended to end a prolonged fiscal crisis that gripped Washington, battered Republican approval ratings and threatened the global economy with a new recession. Congress was gearing up to pass the measure before the day was out.

Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell announced a plan that would fund the government through January 15 and allow the Treasury to increase the nation’s borrowing authority through February 7.

Both the Democrat-controlled Senate and Republican-controlled House of Representatives must approve the plan, which President Barack Obama would then sign before today’s deadline for Congress to increase the federal debt limit.

Obama applauded the Senate compromise and hoped to sign it into law, White House spokesman Jay Carney said.

US stock indexes jumped by more than 1 per cent by late morning on news of a deal.
Reid, leader of Senate Democrats, thanked McConnell for working with him to end what had become one of the nastiest partisan stand-offs in recent Washington history.

“This is a time for reconciliation,” said Reid.

McConnell said the time had come to back away for now from Republican efforts to gut Obama’s Affordable Care Act, known as Obamacare. But the feisty minority boss said Republicans had not given up on erasing the plan from the legislative books.

The crisis began on October 1 with a partial shutdown of the federal government after House Republicans refused to accept a temporary funding measure unless Obama agreed to defund or delay his health care overhaul law.

It escalated when House Republicans also refused to move on needed approval for raising the amount of money the Treasury can borrow to pay US bills, raising the spectre of a catastrophic default. Obama vowed repeatedly not to pay a “ransom” in order to get Congress to pass normally routine legislation.

The hard-right tea party faction of House Republicans, urged on by conservative Texas Republican Ted Cruz in the Senate, had seen both deadlines as weapons that could be used to gut Obama’s health care overhaul, designed to provide tens of millions of uninsured Americans with coverage.

The Democrats remained united against any Republican threat to Obama’s signature programme, and Republicans in the House could not muster enough votes to pass their own plan to end the impasse.

Cruz said after the deal was announced that he would not block a vote. That was a key concession that signalled a strong possibility that both houses could act by day’s end. That, in turn, would allow Obama to sign the bill into law ahead of the Thursday deadline that Treasury Secretary Jacob Lew had set for action to raise the $16.7 trillion (Dh61.42 trillion) debt limit.

The Senate plan’s passage in the Republican-controlled House likely will require House Speaker John Boehner put the measure to a vote as is and depend heavily on minority Democrats to support it. The move is risky and seen as imperilling the House leadership, but Boehner was apparently ready to do it and end the crisis that has badly damaged Republican approval among voters.

Boehner and the House Republican leadership met in a different part of the Capitol to plan their next move. A spokesman, Michael Steel, said afterward that no decision had been made “about how or when a potential Senate agreement could be voted on in the House.”

Republican Sen. Lindsey Graham said the party had hurt its cause through the long and dangerous standoff.

“This package is just a joke compared to what we could have gotten if we had a more reasonable approach,” he told NBC.

Driving the urgency was not only the calendar but also fears that financial markets would plunge without a deal. Looking forward, lawmakers were also concerned voters would punish them in next year’s congressional elections. Polls show the public more inclined to blame Republicans.

Since the standoff began, House Republicans dropped their demands to gut the health care law. But Congress still struggled futilely for more than two weeks to pass two measures that are normally routine: the emergency funding bill to keep the government running and legislation to raise the $16.7-trillion borrowing limit.
Investors have been nervous.

The Fitch rating agency in New York warned on Tuesday that it was reviewing the government’s AAA credit rating for a possible downgrade, though no action was near. The firm, one of the three leading US credit-ratings agencies, said that “the political brinkmanship and reduced financing flexibility could increase the risk of a US default.”

The Senate deal sets a mid-December deadline for bipartisan budget negotiators to report on efforts to reach compromise on longer-term issues like spending cuts. And it likely would require the Obama administration to certify it can verify the income of people who qualify for federal subsidies for medical insurance under the 2010 health care law.

The Senate pact had been put on hold on Tuesday, an extraordinary day that highlighted how unruly rank-and-file House Republicans can be, even when the stakes are high. Facing solid Democratic opposition, Boehner tried in vain to write legislation that would satisfy Republican lawmakers, especially hardcore conservatives in the tea party-aligned caucus.

Boehner had crafted two versions of the bill, but neither made it to a House vote because both faced certain defeat. Working against him was word during the day from the influential conservative group Heritage Action for America that his legislation was not conservative enough — a worrisome threat for many Republican lawmakers whose biggest electoral fears are of primary election challenges from the right.

Primary votes determine which candidate makes it to the ballot for general elections.
Heritage Action said Boehner’s proposal “will do absolutely nothing to help Americans who are negatively impacted by Obamacare.”

Republicans in the Senate, who must be elected on a statewide basis rather than in smaller congressional districts drawn up to secure a Republican advantage, were eager to end the partial government shutdown and avoid an even greater crisis if the government were to default.

The shutdown, the first in 17 years, has furloughed more than 400,000 federal workers.