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U.S. avoids debt default

Published by Steve Coleman on August 03, 2011

American politicians have reached a compromise and avoided defaulting on their national debt.
The U.S. Senate voted 74-26 on Aug. 2 to approve raising the $14.3 trillion deficit ceiling to take the country through the 2012 elections.

The House of Representatives gave its approval to the bipartisan legislation Aug. 1. Besides raising the debt ceiling, the agreement reduces long-term deficits and endorses the agreement President Barack Obama struck with Republican leaders.

The bill creates a process for increasing the debt ceiling by at least $2.1 trillion through 2012 while reducing the deficit by nearly $1 trillion over 10 years. The legislation also establishes a 12-member joint congressional committee that must identify, by Nov. 23, an additional $1.5 trillion in deficit reduction.

If the committee fails, or if Congress does not enact its recommendations, the legislation triggers automatic cuts both to entitlement and defence programs.

"The big win here for us and for the American people is the fact that there are no tax hikes in this package," House Majority Leader Eric Cantor (R-Va.) said.

Republicans said they achieved two-thirds of the spending cuts they sought in their 2012 budget resolution.

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