DEBT SHOWDOWN

Debt ceiling debate works toward contentious compromise

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WASHINGTON (AP) - President Barack Obama says Republican and Democratic leaders in the House and Senate have reached an agreement with him to raise the government's debt ceiling and avoid a default.

Sunday night, President Obama announces the debt ceiling deal has been reached.

Obama told the nation on television that more than $2 trillion in spending cuts will be imposed gradually so they don't create a drag on the economy.

He said the spending cuts will reduce government spending to the lowest level it has been since when Dwight Eisenhower was president in the 1950s.

He said there will be no initial cuts to entitlement programs like Social Security and Medicare. But he said both could be on the table along with changes in tax law as part of future cuts.

Debt deal is 'really close'

WASHINGTON (AP) - Racing to avoid a government default, President Barack Obama and Republican congressional leaders reached urgently for a compromise Sunday to permit vital borrowing by the Treasury in exchange for more than $2 trillion in long-term spending cuts.

Senate Republican Leader Mitch McConnell said the two sides were "really, really close" to a deal after months of partisan fighting. Yet he and others stressed that no compromise had been sealed, just two days before a deadline to raise the federal debt limit and enable the government to keep paying its bills.

As contemplated under a deal that McConnell and Vice President Joe Biden were negotiating, the federal debt limit would rise in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.

Big cuts in government spending would be phased in over a decade. Thousands of programs - the Park Service, Internal Revenue Service and Labor Department accounts among them - could be trimmed to levels last seen years ago.

No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise.

Any agreement would have to be passed by the Democratic-controlled Senate and Republican-controlled House before going to the White House for Obama's signature. With precious little time remaining, both houses were on standby throughout the day, and Speaker John Boehner was in his office.

Without legislation in place by Tuesday, the Treasury will not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on the economy.

If approved, though, a compromise would presumably preserve America's sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.

Senate Majority Leader Harry Reid, D-Nev., said he was "hopeful and confident" a deal would come together. But in a possible hint of dissatisfaction, he pointedly made no mention of congressional Democrats when he said negotiations were between McConnell and the White House and unnamed others.

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