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October 16. 2013 9:28PM

Debt ceiling deal reached; Federal workers to return to jobs


President Barack Obama gestures as he walks into the briefing room of the White House in Washington after the Senate passed the bill to reopen the government Wednesday. (REUTERS/Yuri Gripas)

WASHINGTON - Congress on Wednesday approved an 11th-hour deal to end a partial government shutdown and pull the world's biggest economy back from the brink of a historic debt default that could have threatened financial calamity.

Capping weeks of political brinkmanship that had unnerved global markets, President Barack Obama quickly signed the spending measure, which passed the Senate and House of Representatives after Republicans dropped efforts to use the legislation to force changes in his signature healthcare law.

The White House budget office told hundreds of thousands of federal workers, the bulk of whom had been idle for the past 16 days, to be ready to return to work on Thursday.

The down-to-the-wire deal, however, offers only a temporary fix and does not resolve the fundamental issues of spending and deficits that divide Republicans and Democrats.

It funds the government until Jan. 15 and raises the debt ceiling until Feb. 7, so Americans face the possibility of another bitter budget fight and another government shutdown early next year.

With the deadlock broken just a day before the U.S. Treasury said it would exhaust its ability to borrow new funds, U.S. stocks surged on Wednesday, nearing an all-time high.

Share markets in Asia also cheered the deal.

Taking the podium in the White House briefing room on Wednesday night, Obama said that with final congressional passage, "We can begin to lift this cloud of uncertainty and unease from our businesses and from the American people.

"Hopefully next time it won't be in the 11th hour. We've got to get out of the habit of governing by crisis," Obama said.

He outmaneuvered Republicans by holding firm in defense of "Obamacare" to win agreement, with few strings attached, to end the 16-day shutdown.

World Bank President Jim Yong Kim said "the global economy dodged a potential catastrophe" with congressional approval of the deal to raise the $16.7 trillion U.S. debt ceiling.

The standoff between Republicans and the White House over funding the government forced the temporary lay-off of hundreds of thousands of federal workers from Oct. 1 and created concern that crisis-driven politics was the "new normal" in Washington.

While essential functions like defense and air traffic control continued during the crisis, national parks and agencies like the Environmental Protection Agency have been largely closed.

New Hampshire Sen. Kelly Ayotte hailed the 81-18 Senate vote.

"I'm glad that Republicans and Democrats have reached an agreement that will end the government shutdown and address the debt ceiling in the short term," the Republican said. "However, much work remains to be done to address the underlying fiscal challenges that brought us to this point — including our $17 trillion debt. Americans are rightfully tired and frustrated, and we owe it to them to stop governing by crisis and start working together to solve problems."

Sen. Jeanne Shaheen released this statement after the vote: "I'm glad we were able to come together and pass a bipartisan plan tonight to reopen our government, which never should have been shut down, and avoid the catastrophic economic consequences of a default," the Democrat said. "Moving forward we need to develop a long-term plan to address our debt and deficits so we can avoid future manufactured crises that hurt jobs, the economy and our middle-class."

The Republican-controlled House was expected to take up the measure later Wednesday after Speaker John Boehner dropped the party's efforts to link the spending measure to changes in President Barack Obama's health care law.

The deal, however, offers only a temporary fix and does not resolve the fundamental issues of spending and deficits that divide Republicans and Democrats. It funds the government until Jan. 15 and raises the debt ceiling until Feb. 7, so Americans face the possibility of another government shutdown early next year.

U.S. stocks surged, nearing an all-time high, on news of the deal.

The stand-off between Republicans and the White House over funding the government forced the temporary lay-off of hundreds of thousands of federal workers from Oct. 1.

Sen. John McCain, whose fellow Republicans triggered the crisis with demands that President Barack Obama's signature "Obamacare" health care law be defunded, said Wednesday the deal marked the "end of an agonizing odyssey" for Americans.

"It is one of the most shameful chapters I have seen in the years I've spent in the Senate," said McCain, who had repeatedly warned Republicans not to link their demands for Obamacare changes to the debt limit or government spending bill.

The Senate passed the measure on a 81-18 vote, and the House was expected to follow suit, clearing the way for Obama to sign it into law no later than today, when the Treasury says it will hit the $16.7 trillion debt ceiling.

Fully reopening the government was expected to take several days. While essential functions like defense and air traffic control have continued, national parks and agencies like the Environmental Protection Agency have been largely closed.

Although the deal would only extend U.S. borrowing authority until Feb. 7, the Treasury Department would have tools to temporarily extend its borrowing capacity beyond that date if Congress failed to act early next year.

The agreement includes some income verification procedures for those seeking subsidies under the health care law, but Republicans surrendered on their attempts to include other changes, including the elimination of a medical device tax.

While analysts and U.S. officials say the government will still have roughly $30 billion in cash to pay many obligations for at least a few days after Oct. 17, the financial sector may begin to seize up if the deal is not finalized in both chambers.

The planned votes signal a temporary ceasefire between Republicans and the White House in the latest struggle over spending and deficits that has at times paralyzed both decision-making and basic functions of government.

The political dysfunction has worried U.S. allies and creditors such as China, the biggest foreign holder of U.S. debt, and raised questions about the impact on America's prestige. The Treasury has said it risks hurting the country's reputation as a safe haven and stable financial center.

Senate Majority Leader Harry Reid and Republican leader Mitch McConnell announced the fiscal agreement on the Senate floor. Sen. Ted Cruz of Texas, said he would not use procedural moves to delay a vote.

It was unclear if Boehner's leadership position will be at risk in the fallout. But several Republican lawmakers suggested he may have strengthened his standing among the rank-and-file, who gave him a standing ovation at an afternoon meeting.

"He just said we live to fight another day and we all need to go out and vote for it," said Republican Rep. Devin Nunes of California, who had opposed the government shutdown strategy of his colleagues.


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