US Congressional Vote on Debt Issue Postponed

Posted July 29th, 2011 at 4:55 am (UTC-5)
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Republican leaders in the U.S. House of Representatives will attempt to hold a vote Fridy on their plan to raise the U.S. borrowing limit and cut spending after they were forced to postpone the vote due to opposition in their party.

The Republican-led House was scheduled to vote Thursday on a plan crafted by Speaker John Boehner that would raise the country's $14.3 trillion borrowing limit in exchange for more than $900 billion in spending cuts over the next 10 years. The U.S. will run out of money to pay its debts if the limit is not raised by August 2 , which would push the government into default.

But rank-and-file Republicans, including those aligned with the party's ultra-conservative Tea Party faction, opposed Boehner's plan, saying it did not cut enough in government spending.

House and Senate Democrats are also strongly opposed to the plan, because it calls for a second vote later this year to further raise the debt ceiling in exchange for even bigger spending cuts. President Barack Obama has threatened to veto the measure if it is passed by Congress.

Senate Democratic Leader Harry Reid has advocated a rival plan he says would cut spending by $2.5 trillion while extending the borrowing limit until the end of 2012.

Without a deal on some kind of plan to raise the limit on borrowing by the deadline, rating agencies would likely to cut the U.S. credit rating, bringing higher interest rates and hurting economic growth.

House Democratic Leader Nancy Pelosi criticized the Republicans' actions, saying the party has “taken us to the brink of economic chaos.”

The stalemate in Washington has also had a negative impact on overseas financial markets. Trading on Asian stock exchanges was down Friday in the wake of the House's failure to vote on Boehner's plan. Christine Lagarde, the head of the International Monetary Fund, warned Thursday the value of the U.S. dollar could decline if the impasse is not resolved.

White House spokesman Jay Carney says Mr. Obama is optimistic a compromise can be reached before the August 2 deadline. Carney says a successful compromise would significantly cut spending, set up a way to reform taxes and control spending on social programs, and lift the debt ceiling.