Shades of Eisenhower and the 1950s for American spending
The Senate and House of Representatives were expected to approve a deal to raise the limit on borrowing by up to $2.4 trillion (1.4tr) from the current $14.3tr and forestall an unprecedented American default on the country's debts, after weeks of outright partisan warfare between the Democrats and the Republicans.
Mr Obama and the Democrat and Republican leaderships were poised to sign off the agreement on the eve of the deadline to avoid a US default on payments to investors in Treasury bonds, recipients of social security pensions, those relying on veterans' benefits and businesses that do work for the government. However, large numbers of the right wing Tea Party-backed Republican members of the House of Representatives and their liberal Democratic opponents remained deeply dissatisfied with the package.
Key planks of the deal include the setting-up of a bipartisan congressional committee to come up with proposals by November to agree $1.5tr in cuts through tax reform and other deficit-reduction measures.
Another aspects of the agreement include raising borrowing powers sufficiently to keep the divisive issue from returning to the national agenda until after next year's presidential election.
However, it does not include any tax increases, which Mr Obama had come under pressure to include by his Republican opponents.
The president said the plan would initially cut about $1tr from US spending to "the lowest level of domestic spending since Dwight Eisenhower was president" in the 1950s, allowing the country to avoid the prospect of defaulting on its debts for the first time in its history.
Mr Obama said: "Is this the deal I would have preferred? No."
But he added: "Most importantly, it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. And it will allow us to lift the cloud of doubt and uncertainty that has hung above the United States."
No benefit cuts were envisaged for the social security pension system or Medicare, the federal programmes that provide health care payments to the elderly. However, other areas are to be scoured for savings, including Medicaid - the health programme for people with low incomes and resources - a move that has led to discontent among sections of Mr Obama's Democrats.
Democrat Representative Cedric Richmond said he feared the deal would have a "devastating impact" on low earners, with the working and middle classes bearing the brunt of the cuts.Representative Emanuel Cleaver, a Missouri Democrat, said of the deal: "On the surface, it looks like a Satan sandwich."
Meanwhile, Tea Party-influenced Republicans and figures on the right of the party are likely to be unhappy that tax cuts and more severe spending cuts were not included. But Mr Obama's spokesman said he would continue to push for an extension of a payroll tax cut, despite that not being part of the deficit-cutting deal expected to be reached last night.
Democratic majority leader Harry Reid and Republican Senate leader Mitch McConnell were two of those pushing the debt deal. In the Senate yesterday, Mr Reid called it a "remarkable agreement". He later said that although "neither side got what they wanted", the deal was "typical for compromise legislation".
After a meeting of his fellow Senate Democrats, Mr Reid said the legislation had received a mixed reception from his colleagues, with some showing enthusiasm and others not.
US Vice President Joe Biden, held two-and-a-half-hour talks with Democrats in the House to win support for the deal and said it had been a "good" meeting.
Describing the debt ceiling as a "sword of Damocles", he said it had been used "as the means by which, unless certain compromises were made, we would default on our debt".
He added that, under different circumstances, "we would be talking about job creation, infrastructure and investment".
Mr Obama sent a video to Congress aimed at selling the plan to Democrats. "This has been a long and messy process," he said. "As with any compromise, the outcome is far from satisfying."