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Tuesday, 2 August 2011

US Senate Set to Vote on US Debt Ceiling Bill

The U.S. Senate will vote Tuesday on a compromise bill to cut government spending and raise the nation's borrowing limit, bringing a likely end to weeks of fear over a potential American debt default.

The Senate is expected to vote on the deal at noon local time, just 12 hours before the government says it will run out of money to pay its bills.

On Monday night, the bill passed its biggest test when the Republican-led House of Representatives approved it by a vote of 269 to 161.
U.S. Debt Deal Facts
  • It allows the debt ceiling to rise by up to $2.4 trillion - enough to keep the country borrowing money until 2013.
  • It includes spending cuts that could reach $2.5 trillion, to exceed the amount of the debt ceiling increase.
  • It initally cuts spending by at least $900 billion over 10 years, and creates a bipartisan budget committee to find additional deficit reduction of at least $1.5 trillion.
  • If the committee fails by late November to find additional ways to reduce the deficit, the failure would trigger automatic cuts across the government to take effect in 2013. Among them would be the first reduction in Defense Department spending in decades.
  • The deal does not include the Republicans' goal of requiring a balanced-budget amendment. It also leaves out the Democrats' plan to end some tax cuts for the wealthy.

If the legislation passes the Senate Tuesday, it will be sent to President Barack Obama, who has said he is anxious to sign the bill.

The deal would allow the government to continue borrowing money through 2012 in exchange for spending cuts of almost $1 trillion over the next 10 years.

The package would also create a bipartisan budget committee tasked with finding additional cuts of $1.5 trillion. If the panel fails to reach an agreement, then the deal would trigger additional spending cuts.

Although party leaders say they expect the deal to pass its final hurdle in the Senate, many lawmakers are still reluctant to support it. Some conservatives say the package does not cut enough spending, and liberals complain the cuts are too deep and that the bill does not raise taxes on the rich.

Meanwhile, it is not clear if the deal contains enough spending cuts to avoid a downgraded credit rating. Standard & Poor's credit rating agency had threatened to downgrade America's AAA rating unless Congress passed at least $4 trillion in deficit cuts.

A downgraded credit rating would mean it would cost more for the government to borrow money, which could in turn raise interest rates on many consumer loans

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