Debt deal needs $2.4 trillion cuts

Elizabeth Fournier
■ Three-stage plan to up debt ceiling

■ Balanced budget vote survives

US LEGISLATORS moved towards a deal with the White House last night in a bid to tackle America’s $14.3 trillion (£8.7 trillion) debt pile.

Though the final vote on a compromise plan was again pushed back, with the US Senate expected to pass judgement today and Congress tomorrow, more details were emerging of how spending cuts could look.

According to officials from both Democrats and Republican parties, the plan would include around $2.4 trillion of cuts over the next decade, but no tax rises. An initial $900bn of deficit reductions would be followed by a second round of $1.5 trillion to be decided by a nominated panel of lawmakers appointed by Congress and the Senate.

Key to the plan is a three-stage process for raising the debt ceiling, allowing the US government to take the limit off its debt this week to meet its obligations. The initial increase would see $400bn added to the ceiling, with a further $500bn rise later this year, pending a vote of disapproval. The final and biggest increase, of £1.5 trillion, will also be put to a vote.

The controversial vote on a balanced budget amendment also seems to have made it into the compromise proposal.

As the US approaches the final deadline for an increase to the debt ceiling at 11.59pm tomorrow, Senate majority leader Harry Reid said he had signed off on a debt ceiling deal, pending approval in the Democrat-led Senate.

Oil prices advanced from a two-week low on optimism the deadline would be met, and the dollar rallied as Asian markets opened. The Nikkei also gained almost one per cent in early trading, rising to 9,928.602.