President Obama and congressional leaders finally reached a deal Sunday night (July 31st) to raise the debt ceiling and avert the country's first-ever financial default, agreeing on the legislation just two days before the August 2nd deadline. The measure still must be approved by Congress, however, and while Senate passage is virtually certain, it could be tougher to get enough votes in the House.

Obama announced the deal last night:

http://www.youtube.com/watch?v=Zm4k73OukzM

Neither side got all of what they wanted in the compromise deal, which will cut at least $2.2 trillion from federal spending over a decade, a figure in between the larger cuts the Republicans wanted and the smaller ones desired by the Democrats. Obama and the Democrats got the debt ceiling extended past the 2012 elections, which had been a key objective, but didn't get increased taxes on wealthy Americans. Republicans got spending cuts of slightly more than the increase in the debt limit, but lost the effort to force Congress to approve a balanced-budget amendment to the Constitution.

The deal is a two-stage plan. Triggered first would be more than $900 billion in spending cuts over a decade from hundreds of federal programs, and a $900 billion increase in the debt ceiling. In the second stage, a bipartisan committee of Congress would be created and charged with recommending $1.5 trillion more in deficit reduction by Thanksgiving. The deficit cuts could come from benefit programs such as Medicare, Social Security and Medicaid, as well as from an overhaul of the tax code. Congress must vote on them by Christmas or trigger $1.2 trillion in across-the-board cuts that would hit both defense spending and domestic programs. Exempt from the automatic cuts, however, would be Social Security, Medicaid and veterans' benefits, although payments to doctors, nursing homes and other Medicare providers could be cut.