Image: Rep. Gabrielle Giffords
NBC News
Rep. Gabrielle Giffords returns to Washington for the first time Monday to vote on the debt deal.
updated 8/1/2011 8:40:29 PM ET 2011-08-02T00:40:29

The Republican-controlled House of Representatives passed bitterly fought, compromise debt-limit legislation Monday night that would prevent a U.S. default on its obligations but at a cost of deep cuts in government spending.

The measure still must gain approval in the Senate before it goes to the White House where President Barack Obama has promised to sign it into law. It passed the House 269-161.

Passage in the Senate was seen as nearly certain. The upper chamber was slated to vote on it at noon Tuesday, just hours before the midnight deadline for lifting the $14.3 trillion cap U.S. borrowing.

First Read: CBO scores deficit reduction plan
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In the minutes before the legislation won approval, applause rang out through the lower chamber as Democratic Rep. Gabrielle Giffords made a dramatic appearance on the House floor, her first since she was shot during a meeting with constituents at a Tucson, Arizona, shopping center in January. Giffords has been undergoing rehabilitation since she was gravely wounded by a gunshot that pierced her brain. She acknowledged her warm welcome, standing among well-wishing colleagues, raising her left hand to waive to fellow legislators in the House.

Her office said she had returned Monday in support of the measure that was passed by the House.

While the odds were in favor of House passage, the compromise deal deeply angered both right-wing Republicans and left-wing Democrats.

Vote: Is proposed debt deal good for the country?

The measure was crafted through the crucible of one of the United States' nastiest political fights in recent history. It carefully threaded the needle between the philosophically opposite ends of the political spectrum.

Polls showed that Congress and even Obama have taken a sharp hit in U.S. public opinion because of the prolonged battle over lifting the debt ceiling, something that past Congresses have done as a matter of course.

Without legislation in place by the end of Tuesday, the Treasury would run out of cash needed to pay all its bills which could interrupt payments to investors in Treasury bonds, recipients of Social Security pension checks, anyone relying on military veterans' benefits and businesses that do work for the government. Administration officials say a default would ensue that would severely damage the economy.

Video: Breaking down the debt deal

Beyond merely avoiding disaster, Obama and congressional leaders hoped their extraordinary accord would reassure investors at home and around the world, preserve the United States' Aaa credit rating and begin to slow the growth in America's soaring debt.

News of the agreement initially buoyed global investors, but European markets surrendered those increases and closed down significantly on worries about the American economy. U.S. stocks also climbed after opening but slipped well into negative territory after a bad report on American manufacturing. Shares closed the day, however, down only about 11 points, or .09 percent.

Before the vote, Obama sent a video to Congress aimed at selling Democrats on the plan. "This has been a long and messy process," he said. "As with any compromise, the outcome is far from satisfying."

As the Senate opened for business Monday, Majority leader Harry Reid declared the deal shows that the often-dysfunctional Senate can come together when it counts. "People on the right are upset, people on the left are upset, people in the middle are upset," he said. "It was a compromise."

The deal came together Sunday night when Obama sealed a deal with leaders of both parties in both houses of Congress on the plan that would initially cut about $1 trillion from U.S. spending.

No real winners in debt deal

Obama and many economists and financial experts predicted global chaos and plunging stock markets without the legislation.

House Speaker John Boehner, obviously pleased and relieved at the House vote, gaveled the measure as passed. His standing took a beating in the long fight as he struggled to meld the wishes of the low-tax, small-government tea party wing of his party — 87 new members elected last year — and more mainstream Republicans in the House.

The tea party and Republicans more largely successfully blocked Obama's attempts to raise taxes as part of the plan to slash the deficit, but the president was successful in blocking opposition attempts at a short-term debt ceiling extension. That would have returned the now-poisonous issue to the national agenda early next year, in the midst of the presidential and congressional election campaign.

At a news conference Monday afternoon Boehner said the compromise would "solve this debt crisis and help get the American people back to work."

House Democratic leader, Rep. Nancy Pelosi, was far less effusive. "I'm not happy with it, but I'm proud of some of the accomplishments in it. That's why I'm voting for it."

The broadest outlines of the emerging plan, a deal that involved deep negotiations between Senate Republican Leader Mitch McConnell and Biden, would raise the federal debt limit in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.

The cuts in government spending would be phased in over a decade. Thousands of programs could be trimmed to levels last seen years ago.

No benefit cuts were envisioned for the Social Security pension system or Medicare, the federal programs that provide health care payments to the elderly. But other programs would be scoured for savings. The possibility of higher taxes taking effect were hotly disputed and off the table in the near future.

Video: Obama adviser: Debt deal will pass

The first step would take place immediately, raising the debt limit by nearly $1 trillion and cutting spending by a slightly larger amount over a decade.

That would be followed by creation of a new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs, such as Medicare and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit, which would be needed by early next year.

If the committee failed to reach its $1.8 trillion target, automatic spending cuts totaling $1.2 trillion would kick in, and the debt limit would rise by an identical amount. The conservative campaign to force Congress to approve a balanced-budget amendment to the Constitution has been jettisoned.

Social Security, as well as the Medicaid and food voucher programs that provide health care and grocery money for the poor, would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

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Video: Debt deal kicks big issues down the road

  1. Closed captioning of: Debt deal kicks big issues down the road

    >> analysis on the politics of what went on here, what's going on here, our chief white house correspondent and political director chuck todd . chuck, what just happened and for the folks watching tonight, they're going to want to know what's in it for them, what's not in it for them?

    >> reporter: i guess the best way to describe it is the two parties decided to have a detente. they cut a deal that kicks the big debate and big problems down the road, and almost saves them for the 2012 campaign. what are those big debates? the issue of the growing entitlement reform problem that we have, this idea that, you know, we're living longer, more people on social security , more people using medicare. and then this issue of taxes, who should pay them, how much, what should the rates be? this deal doesn't touch either of those two big issues. and instead, in many ways, preserves them for both parties to use them as clubs to hit the other party over the head in 2012 . yes, it's possible the super committee, if they put on capes, could do tax reform , could do entitlement reform, but i talked to people involved in all these deals. they don't expect it. so the big problems, brian, been kicked down the road.

    >> okay. of course, we had many blue ribbon commissions who have been given the same job, they come out with a report and washington keeps rolling along. chuck todd across town at the white house .

Photos: Taking the Hill: Inside Congress

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  1. With more than 30,000 employees and 535 legislators between the House and Senate, the U.S. Capitol complex is like a city unto itself. Months ago, NBC News received permission to flood the Hill with cameras for a day-in-the-life documentary shoot. What no one knew at the time is that the Capitol would be in the midst of grinding talks over the national debt while we were there. This slideshow consists of photos taken while dozens of NBC TV cameras roamed the buildings and grounds this past Wednesday, July 27. The resulting documentary, "Taking the Hill: Inside Congress," airs Sunday, July 31 at 7 p.m. ET. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  2. As the day begins, Brian Williams, anchor of NBC's "Nightly News" and host of "Inside Congress," waits for House Speaker John Boehner, R-Ohio, to emerge from the Memorial Doors after his arrival at the Capitol. Speaker Boehner was under immense pressure to deliver enough Republican votes to pass his debt-ceiling plan and it showed in his demeanor. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  3. Initially, it was thought that Boehner's plan would come up for a vote on the House floor the day we were there. But it was held back after questions emerged over how much money it would actually save. The next day, it was tabled again, reportedly over fears it didn't have enough support among Boehner's Republican colleagues. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  4. For Boehner and his House and Senate colleagues, the Capitol building is where much of the nation's business gets done. Few who visit fail to be impressed by the building's giant dome, which looms over Washington, D.C. The building's initial design was chosen through a competition with a $500 prize. William Thorton, a physician, submitted the winning drawing and construction began in 1793 when President George Washington laid the cornerstone. It has been a work in progress ever since. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  5. In the Rotunda, , which sits under the dome, a statue of Abraham Lincoln appears to be pointing at Capitol police officers. The Rotunda, which was designed to emulate the Roman Pantheon, boasts statues and busts and large-scale works of art. Members of the Capitol police force are never far from view in and around the Capitol, with more than 1,500 of them protecting congressional buildings and parks. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  6. The circle on the Rotunda floor is the physical center-point of the Capitol, a midpoint between the House and Senate wings. The Rotunda is considered a neutral zone of sorts, the Switzerland of the building. To pull off NBC's day-in-the-life of Congress documentary, more than 80 crew members descended on the Capitol, including producers (like Subrata De, seen with Williams), camera operators and lighting and sound technicians. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  7. The Capitol Dome, which sits above the Rotunda, was designed by Charles Bulfinch in 1824, but it was soon considered too small for the rest of the building and a fire hazard. Thomas Walter redesigned the dome in the 1850s, causing a frenzy among congressmen delighted by Walter's more grandiose vision. Today, the area inside the dome measures 180 feet top to bottom. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  8. Williams waits for Sen. Harry Reid, D-Nevada, to exit the Senate floor. By his side is Ken Strickland, deputy bureau chief for NBC News in Washington, D.C., and former Senate producer for NBC. Strickland is explaining that cameras are never allowed to shoot the doors of the Senate. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  9. Later, in Reid's office, the senator shows off a painting of Las Vegas as it used to be: a cowboy town. When asked about Rep. Boehner and the debt negotiations, Sen. Reid said the House Speaker had "painted himself into this corner that makes our job over here much more difficult." (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  10. You never know who you'll come across when walking around the congressional complex. Here, Max Page, the young actor who played mini-Darth Vader in a Super Bowl car commercial, offers his autograph to Williams. Page has a heart defect and was on Capitol Hill to lobby against cuts to health care funding. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  11. Rep. Kristi Noem, a Republican of South Dakota, is a first-year member and a rising star in the Tea Party. Interviewed in the Longworth House Office Building cafeteria by Williams, Noem is considered by some to be the "next Sarah Palin." In 1997, she received the South Dakota Oustanding Young Farmer award. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  12. Just above Speaker Boehner's desk sits a motivational plaque that reads, "It CAN be done." As the NBC team neared Boehner's office, the smell of smoke was unmistakable, a rare occurrence in the nation's increasingly health-conscious capital. Boehner's smoking habit is well-known but he's rarely caught on camera with a cigarette in his mouth. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  13. With the debt negotiations roiling his caucus, Boehner told Williams that "no one ever said it would be pretty." When asked if it was fair to say he had a bit of a rebellion on his hands, Boehner replied that this was nothing unusual. "I've got a little rebellion on my hands every day. It comes with the terrority," he said. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  14. The view from the Speaker's Balcony is one of the best in Washington, D.C. In the distance, the Washington Monument rises above the National Mall. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  15. An avid golfer, Boehner has a bowl of tees in his office with "Speaker John Boehner" stamped on them. A recent round of golf with President Obama failed to produce an agreement that could pass the House. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  16. The Capitol complex is connected by underground tunnels and subways. Here, Williams is escorted from a House office building to the Capitol by a police officer. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  17. Minority Leader Nancy Pelosi, D-Calif., greets tourists in Statuary Hall. The hall is comprised of statues donated by individual states to honor prominent people. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  18. Pelosi has gone from being minority leader to speaker of the House and now back to minority leader again, as the House of Representatives changed hands between Republicans and Democrats. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  19. Leaders in Congress, such as the speaker of the House and the majority leader, have offices in the Capitol and also in the nearby congressional office buildings. When power shifts between the parties, one of the most visible signs of the switch is when the Capitol offices change hands. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  20. Rep. Eric Cantor, R-Va., assumed the role of majority leader this year after Republicans knocked Democrats out of power in the 2010 elections. His breed of economic conservatism is ascendant in the Republican Party. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  21. A close-up of the "Cantor Rule:" "Are my efforts addressing job creation and the economy? Are they reducing spending? Are they shrinking the size of the federal government while protecting and expanding liberty? If not, why am I doing it... Why are WE doing it?" (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  22. Staffers line the halls outside Cantor's office. With office space in short supply, desks are squeezed wherever there is room. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  23. Certain elevators on both the House and Senate side are reserved for members of Congress only or people they invite. The purpose is to allow easy travel to the floor for votes. In recent years, some senators have complained that too many staffers, lobbyists and even tourists have been riding the Senate-only elevators. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  24. Rep. Stenny Hoyer, D-Md., is the house minority whip; the person responsible for ensuring discipline among his party's legislators. The position requires deep political skills and countless hours of arm-twisting, cajoling and counting votes. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  25. Hoyer is a graduate of the University of Maryland, College Park, whose mascot is the terrapin, a species of turtle. He displays a number of turtles in his office and says these are only a portion of his total collection. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  26. Sen. Mitch McConnell of Kentucky is the Republican minority leader in the Senate, an institution whose filibusters and holds and other arcane procedures often slow the legislative process. During the interview, Williams asked McConnell, a fiscal conservative, why "rich folks" shouldn't pay more in taxes to help reduce the debt. "They do. They pay an extraordinary amount more," McConnell said. "In fact, about half of Americans don't pay any income taxes at all." (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  27. Members and staffers receive an economic briefing from Jared Bernstein, who served as the chief economist for Vice President Joe Biden until earlier this year. Experts for both Republicans and Democrats can be seen all over the Hill, testifying in hearings as well as giving closed- and open-door briefings. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  28. The “three amigos” Sens. Lindsey Graham, Joe Lieberman and John McCain maintain what is becoming an endangered species in Congress: a deep friendship that crosses partisan lines. These kinds of relationships are crucial during tense negotiations like the debt talks. (Antoine Sanfuentes / NBC News) Back to slideshow navigation
  29. The Senate subway speeds senators and staffers to and from the Capitol building and the Senate office buildings. For reporters, the subway platforms can be great places to buttonhole legislators who would rather avoid questions. For legislators, they provide quick access to the Capitol for votes and a convenient way to leave at the end of a long day. () Back to slideshow navigation
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