US House votes to raise debt ceiling

The US House of Representatives has voted to raise the country's debt ceiling and impose massive spending cuts to prevent an unprecedented federal default.

US President Barack Obama yesterday announced Republican and Democrat leaders had agreed to a two-part plan raising the $14.3 trillion debt ceiling in the US, after weeks of highly partisan debate.

The deal includes spending cuts of about US $2.4 trillion over 10 years, which Congress would approve in two steps; an initial US$917 billion when the deal passes Congress and another US$1.5 trillion by the end of the year.

The House of Representatives this morning voted in favour of the plan, hours ahead of a deadline after which defaults were threatened.

A majority of Republicans and about half of the Democrats caucus voted to push through the package, the New York Times reported.

Obama yesterday said the deal was a compromise necessary in an intensely partisan US political environment.

"Is this the deal I would have preferred? No.

"I believe we could have made the tough choices required.. right now.

"This compromise does make a serious downpayment on the deficit reduction we need. It will allow us to avoid default... and end the crisis that Washington imposed on the rest of America."

Obama credited the voice of the American people with turning the tide in the debt debate that has gripped Washington for weeks.

He said the debate had done damage to the US economy.

"This process has been messy. It has taken far too long. I am concerned about the impact it has had on business confidence and consumer confidence."

The compromise deal still has to pass in the Democrat-controlled US Senate.

Giffords takes part in vote

Congresswoman Gabrielle Giffords was on the House of Representatives floor for the first time since her shooting earlier this year to attend today's vote.

Fellow lawmakers crowded around Giffords to shake her hand when she appeared on the House floor moments before House passage of the compromise bill.

Giffords, an Arizona Democrat, was shot in the head in January while meeting with constituents in her district. On the House floor, she hugged and kissed fellow lawmakers as those in the chamber applauded.

Debt crisis' effect on NZ

The debt crisis has seen the New Zealand dollar rise to a series of post-float highs.

It spiked to a new post-float high of 88.2USc immediately after President Obama made his announcement yesterday.

Prime Minister John Key said the dollar would track even higher if a deal was not reached.

"You would expect our exchange rate to track even higher," he said.

"You've seen the NZ-US exchange rate moving up on the back of the deep concern that the financial markets have that the US might not get a deal done and that overall the US economy."

Key said the crisis showed his Government was right to constrain spending and work to reduce debt.

- Herald Online staff