US Senate to hold 11th hour vote on debt plan

With only hours to go before a deadline, the US Senate was expected Tuesday to approve a massive austerity plan to avert a debt default that would have wreaked havoc through the global economy. The vote comes a day after the polarized US House of Representatives came down on a 269-161 margin to back the package pushed by President Barack Obama to raise the limit on US borrowing and enact at least $2.1 trillion in spending cuts over the next decade. After eight months of an often angry stand-off, the Democratic-led Senate was expected to support the emergency measure in a noon (1600 GMT) vote -- a mere 12 hours before a midnight deadline by which the world's richest nation would run out of cash to pay its bills. Analysis: Little economic impact from US debt deal "It is imperative that the United States not default on the nation's obligations, that the full faith and credit of the United States be preserved, and that the nation's fiscal house be put in order," the White House urged. In a moment of high drama -- a rare show of unity in the ideologically torn Congress -- Democratic Representative Gabrielle Giffords drew applause and cheers from her assembled colleagues as she made a triumphant first return since being shot in the head in a January rampage in her home state of Arizona. The vote meanwhile showcased many of the political fault lines likely to shape Obama's November 2012 re-election bid, notably conservative Republicans' all-out push to cut government spending, and Democrats' quest to raise taxes on the rich. It was also key test for House Speaker John Boehner, a Republican, who said in brief remarks to CNN after the vote: "The process works. It may be messy, but it works." On Boehner's right flank, the ultraconservative "Tea Party" among Republicans had demanded a harder line. Tea Party favorite Michele Bachmann opposed the deal as too tepid, although other members of the movement called the deep spending cuts a triumph. Facts: US debt deal features heavy cuts Liberal Democrats were meanwhile outraged at what they saw as an abandonment by Obama of core principles, aghast that the plan relied on spending cuts and did not include increases in tax revenues from the rich and wealthy corporations.Obama has called for letting tax cuts for the top brackets expire in January 2013. Representative Nancy Pelosi, the top House Democrat and leading member of the party's left-wing, took to the floor before the vote and pleaded with her colleagues to consider supporting the package. "I'm not happy with it," she said, but "please think of what could happen if we defaulted. Please, please, please come down in favor of preventing the collateral damage to our seniors and our veterans." Financial markets were showing concern, with early optimism evaporating by midday on worries the deal could fail to prevent a downgrade of Washington's top Triple-A debt rating.A downgrade could push up US interest rates, making debt payments more expensive and affecting any flexible-rate loan in the sputtering US economy, still grappling with historically high unemployment of 9.2 percent. European stock markets slipped across the board, while in China, the largest holder of US debt, state media chided Washington for a deal that may avoid default yet as "its sovereign debt problems remain unresolved." Asian markets had tumbled on Tuesday, a day after the yen approached its record high against the dollar in New York trade. Russia and China, often on the receiving end of US criticism, have been critical of the debt talks. Russian Prime Minister Vladimir Putin accused the United States of acting as a "parasite" living off its creditors. US Vice President Joe Biden, a 36-year veteran of the Senate, held talks on Capitol Hill to press fellow Democrats to back the deal, fruit of six months of fitful talks between Obama and his Republican foes.The blueprint negotiated between Obama and congressional leaders would include more than $900 billion in cuts over the next 10 years -- $350 billion of it in defense. A special congressional committee would then be tasked with coming up with another $1.5 trillion in cuts to report by November 23. A failure by the committee would trigger automatic cuts -- half in defense spending, a priority for many Republicans. Focus: US company profits surge, even as economy slows Automatic cuts would not touch Democratic-backed Social Security and Medicare payments for the elderly, although they would still affect providers of the health care program. Analysis: US deal helps avoid default but not downgrade In a key point for Obama, the package will raise the debt ceiling into 2013 --- meaning he will not be forced into a similar showdown with Congress on spending in the midst of his re-election campaign next year. The debt ceiling would rise by up to $2.4 trillion in two steps. The US government hit its current debt limit of $14.3 trillion on May 16 and has since been operating through spending and accounting adjustments, as well as higher than expected tax revenue.