President Barack Obama and congressional leaders said Sunday night that they have agreed on the framework of a budget deal that both Democratic and Republican leaders plan to present to their caucuses on Monday.

The plan is expected to lift the debt limit in two increments to last until 2013, thereby averting another debt ceiling showdown until after the 2012 elections, while cutting federal spending by about $2.4 trillion. The initial step will be $1 trillion.

“There are still some very important votes to be taken by both parties, but I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy,” said Obama. “The first part of this agreement will cut about $1 trillion in spending over the next 10 years, cuts that both parties had agreed to early on in this process.”

Obama added that the result would be the lowest level of annual domestic spending since Dwight Eisenhower was president, but at a level that still allows Washington to make job-creating investments in areas such as education and research. Obama noted that the agreement also involves the creation of a special bipartisan committee that would recommend further spending cuts and changes in the Tax Code and entitlement programs.

“We also made sure that these cuts wouldn’t happen so abruptly that they would be a drag on a fragile economy,” Obama added. “Now I’ve said from the beginning that the ultimate solution to our deficit problem must be balance. Despite what some Republicans have argued, I believe that we have to ask the wealthiest Americans and the biggest corporations to pay their fair share by giving up tax breaks and special deductions. Despite what some in my own party have argued, I believe that we need to make some modest adjustments to programs like Medicare to ensure that they’re still around for future generations. That’s why the second part of this agreement is so important. It establishes a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit, which will then be put before the entire Congress for an up or down vote. At this stage, everything will be on the table. It will hold us all accountable for making these reforms. Tough cuts that both parties would find objectionable would automatically go into effect if we don’t act.”

Obama added that over the next few months, he would continue to make a detailed case to the lawmakers on the committee about why he believes a balanced approach is necessary to finish the job. He emphasized that the agreement he had hammered out on Sunday had not been his preferable route.

“Now, is this the deal I would have preferred?” he asked “No. I believe that we could have made the tough choices required in entitlement reform and tax reform right now rather than through a special congressional committee process. But this compromise does make a serious down payment on the deficit reduction we need and gives each party a strong incentive to get a balanced plan done before the end of the year. Most importantly it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. It ensures also that we will not face this same kind of crisis again in six months or eight months or 12 months, and it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”

Obama added that the process had dragged on for an unnecessarily long time and dampened confidence. “Now this process has been messy and it’s taken far too long,” he said. “I’ve been concerned about the impact that it has had on business confidence and consumer confidence and the economy as a whole over the last month. Nevertheless, ultimately the leaders of both parties have found their way toward compromise and I want to thank them for that. Most of all I want to thank the American people. It’s been your voices, your letters, your emails, your tweets, your phone calls that have compelled Washington to act in the final days, and the American people’s voice is a very, very powerful thing. We’re not done yet, and I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days. You will allow us to avoid default, you will allow us to pay our bills, you will allow us to start reducing our deficit in a responsible way, and it will allow us to return to the very important business of doing everything we can to create jobs, produce wages and grow this economy faster than it’s currently growing. That’s what the American people sent us here to do, and that’s what we should be devoting all of our time to accomplishing in the months ahead.”

Minutes earlier, Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ken., announced the bipartisan agreement on the floor of the Senate. That afternoon, the Senate had blocked the plan that Reid had introduced over the weekend (see Reid Debt Limit Plan Blocked Again in Senate).

“The compromise we have agreed to is remarkable for a number of reasons, not only because of what it does, but because of what it prevents: a first ever default on the full faith and credit of the United States,” said Reid. “Sometimes it seems our two sides disagree on almost everything. But in the end these people were able to agree on this. The United States could not take the chance of defaulting on our debt, risking a United States financial collapse and worldwide depression. America and the world have been watching our democracy expectantly, and my message to the world tonight is that this nation and this Congress are moving forward, and we’re moving forward together. Reaching a long-term accord that would give our economy the certainty it needs was not easy, but our work is not done. Leaders from both parties and both chambers will present this agreement to our caucuses tomorrow. Senate Democrats will meet at 11 am. To pass this settlement, we will need the support of Democrats and Republicans in both the House and Senate. There is no way either party in either chamber can do this alone. As President Lyndon Johnson said, and I quote, ‘There are no problems we cannot solve together, and very few that we can solve by ourselves.' Democrats and Republicans have rarely needed to come together more than today. I know this agreement won't make every Republican happy. It certainly won't make every Democrat happy either. But both parties gave more ground than they wanted to, and neither side got as much as it had hoped, but that is the essence of compromise, of consensus building. The American people demanded compromise this week, and they got it.”

McConnell also spoke in favor of the agreement, but emphasized that it still needed to be agreed to by the rank and file, and that it did not include tax increases. “This is an important moment for our country,” he said, standing nearby Reid. “I appreciate the Majority Leader’s comments and want to say a few words to our colleagues who have been so patient over the past several days, and whose ideas and encouragement have been so helpful in getting us to this point. First of all, let me reiterate that before any agreement is reached, Republicans will meet to discuss the framework that the White House and congressional leaders in both parties think would meet our stated efforts to cut spending more than the President’s requested debt ceiling increase, prevent a national default, and protect the economy from tax increases. And to that end, I’d like to say  to my Republican colleagues that we will be holding a conference meeting in the morning to discuss the framework and to give everyone a chance to weigh in. But at this point, I think I can say with a high degree of confidence that there is now a framework to review that will ensure significant cuts in Washington’s spending, and we can assure the American people tonight that the United States of America will not for the first time in our history default on its obligations.”

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