Deal reached to avoid default and open government

Senator John McCain (R-AZ) talks to reporters in the US Capitol in Washington October 16, 2013. Senate Democratic leader Harry Reid and Senate Republican leader Mitch McConnell agreed to raise the US debt limit and end the government shutdown. [Photo/Agencies]

WASHINGTON - Senate leaders announced last-minute agreement Wednesday to avert a threatened Treasury default and reopen the government after a partial, 16-day shutdown. Congress raced to pass the measure by day's end.

The Dow Jones industrial average soared on the news that the threat of default was fading, flirting with a 200-point gain in morning trading.

"This is a time for reconciliation," said Senate Majority Leader Harry Reid of the agreement he had forged with the GOP leader, Sen. Mitch McConnell of Kentucky.

It was a jubilant moment in the chamber, which on Tuesday was forced to sit back and watch as the effort by House GOP leaders for a bill collapsed in disarray.

McConnell said that with the Senate accord, Republicans had sealed a deal to have spending in one area of the budget decline for two years in a row, adding, "we're not going back."

One prominent tea party lawmaker, Sen. Ted Cruz of Texas, said he would oppose the plan, but not seek to delay its passage.

That was a key concession that signaled a strong possibility that both houses could act by day's end. That, in turn, would allow President Barack Obama to sign the bill into law ahead of the Thursday deadline that Treasury Secretary Jacob Lew had set for action to raise the $16.7 trillion debt limit.

While the deal could meet resistance from conservatives in the Republican-controlled House, the Democratic Leader, Rep. Nancy Pelosi of California, supports the plan and says her rank and file is expected to vote for it in overwhelming numbers. That raised the possibility that more Democrats than Republicans would back it, potentially causing additional problems for House Speaker John Boehner as he struggles to manage his tea party-heavy majority.

After abandoning their own plan on Tuesday, House members quietly awaited Senate action, resigned to the likelihood that they would have to back the deal or plunge the nation into default. The only silver lining was the promise that it would be their last vote for the week after three straight weekends in Washington.

Officials said the proposal called for the Treasury to have authority to continue borrowing through Feb. 7, and the government would reopen through Jan. 15.