PresidentBarack Obama and congressional leaders began a fresh attempt to reach agreement on raising the US debt cap, with a potential framework for a deal emerging two days before a threatened default deadline. The White House and congressional Republicans have sketched out the contours of an agreement to increase the nation's $14.3 trillion debt ceiling that would raise borrowing authority through the next presidential election, a person familiar with the talks said late last night.

The tentative framework includes immediate spending cuts of $1 trillion and creation of a special committee to recommend additional savings of up to $1.8 trillion later this year. The new panel would have to act before the Thanksgiving congressional recess in late November and Congress would have to approve its recommendations by late December or government departments and programs, including defense and Medicare, would face automatic, across-the-board cuts, the person said.

No more than 4% of Medicare would be subject to cuts, and beneficiaries would be unaffected as reductions would apply to providers, the person said. Social Security would be untouched. The framework also calls for Congress to vote on a balanced budget amendment to the Constitution, the person said. Amendments require two-thirds majorities to pass, and if enough Democrats oppose the measure it would have little chance of winning approval. White House officials familiar with the talks cautioned after reports of the framework surfaced last night that no final agreement has been reached among those involved in negotiations and that negotiations were continuing.

The prospective agreement wouldn't include increased net revenue, a sticking point for Republicans who've been adamant that any deal with tax increases couldn't pass the Republican-run House. Democrats, including those who run the Senate, have been insistent that any deal must be a "balanced approach" that includes revenue, raising questions about whether Obama would find substantial support from his party for the plan. Obama and congressional leaders on Saturday kick-started the new push to prevent a US government default on its debt after several previous efforts in recent weeks had fallen short.

Republicans and Democrats expressed greater optimism a deal may be within reach before August 2, the date Treasury Department officials have said they will run out of options for avoiding default without a debt limit increase. Financial markets were restrained in reacting to the impasse on a debt deal through July 29. Treasuries rallied, sending yields on 10-year notes to the lowest level since November. The yield on 10-year Treasury notes declined 15 basis points to 2.79% in New York. Stocks fell as economic growth trailed forecasts. The Standard & Poor's 500 Index slipped 0.7% and tumbled 3.9% this week for its worst slide in a year. (Economic Times)