Debt-Limit Agreement Likely to Pass, Republicans

U.S. Senate Republican Leader Mitch McConnell said on Monday he was "optimistic" about the prospects for passing a deficit reduction and debt limit increase measure.

"We're very optimistic. We're going to do well," McConnell told reporters.

But House of Representatives Democratic Leader Nancy Pelosi said she was still undecided, citing the lack of new revenues in the deal.

The House plans to vote today on the agreement reached during a weekend of negotiations that capped a months-long struggle between Obama and Republicans over raising the $14.3 trillion debt ceiling. Senate Majority Leader Harry Reid said he expects a vote “hopefully during” today’s session.

“We’re very optimistic we’re going to do well,” said Senate Republican leader Mitch McConnell, of Kentucky, emerging from a meeting where he briefed Senate Republicans on the plan.

In the House, Budget Committee Chairman Paul Ryan said, “It’s a good agreement, it’s going to pass.”

Both parties worked to sell the deal to their rank and file -- meeting resistance from some Democrats who fault it for failing to increase taxes and from a faction of Republicans who say it’s insufficient to rein in the debt.

Senator Mark Warner, a Virginia Democrat, said he will support the plan even though it doesn’t do enough to tackle long-term spending and revenue issues.

“It helps us avoid default,” said Warner, a member of a bipartisan group who offered their own $3.7 trillion deficit- cutting plan. “This doesn’t get us to the core problem of how do we take on tax reform, how do we take on entitlement reform.”

Senator Lindsey Graham, a South Carolina Republican, said he won’t support the plan in part because of cuts to defense spending.

“If fully implemented, the consequences to our nation’s defense infrastructure would be severe,” Graham said in a statement. “What has happened to the party of Reagan who viewed the primary purpose of the federal government was to provide a strong national defense?”

The plan would save $2.1 trillion over the next 10 years, according to the nonpartisan Congressional Budget Office.

U.S. stocks fell after a gauge of American manufacturing trailed economists’ forecasts. The Standard & Poor’s 500 Index fell 1.1 percent to 1,277.85 at 12:31 p.m. in New York. The Dow Jones Industrial Average slipped 115.42 points, or 1 percent, to 12,027.82.

Treasuries

Treasuries rose, pushing the yield on 10-year notes down to the lowest level this year. The yield on the benchmark 10-year note fell eight basis points to 2.72 percent, the lowest level since November, as of 11:13 a.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent note due in May 2021 slid 18/32, or $5.63 per $1,000 face amount, to 103 12/32.

“We have averted an economic crisis” if both the House and the Senate approve the measure, Richard Durbin of Illinois, the Senate’s second-ranking Democrat, said today on the Senate floor. “It is a compromise and a consensus.”

Vice President Joe Biden told Democratic senators at a closed-door meeting that the deal “wasn’t everything that everyone wanted,” said Senator Amy Klobuchar, a Minnesota Democrat, “but at some point, you have to make a decision and you can’t let the country go over a cliff.”

Representative Steny Hoyer, the second-ranking Democrat in the House, said a majority of House Republicans must vote for the measure if it is to pass. The Maryland Democrat, appearing on Bloomberg Television, said leaders missed an opportunity for a more “balanced” agreement, yet the nation can’t afford to default on its obligations.

“This bill was a creation of the Republicans, and it’s their responsibility to deliver votes,” said Representative Joe Crowley, a Democrat from New York.

“They didn’t rob Peter to pay Paul, they robbed Peter and Paul,” said Democratic Senator Frank Lautenberg of New Jersey. “The president tried his best to make sure we didn’t default, but that doesn’t mean the medicine isn’t so strong that it just tastes awful.”

Obama, in an appearance in the White House briefing room last night, said the “compromise does make a serious down payment on the deficit-reduction we need; most importantly, it will allow us to avoid default.