US Fed debt limit to be raised before Treasury runs out of money: Obama

US President Barack Obama announced a deal with congressional leaders that would allow the federal debt limit to be raised before the Treasury runs out of money.

The 2.4-trillion-dollar increase must still by approved by the Senate and the House of Representatives before a Tuesday deadline, when Obama's Treasury officials said they could run out of money to pay bills, possibly including pensions and bond payments.

The current cap in the national debt is 14.3 trillion dollars. The hike in the debt limit would be enough to keep the government running past the November 2012 elections, which was a key Obama demand.

He said the agreement will "allow us to avoid default and end the crisis Washington imposed on the rest of America".

The deal was the result of last-minute talks between Obama's Democrats, who hold a majority in the Senate, and Republicans who control the lower house.

Republicans, pushed by their conservative "tea party" faction, had sought steep cuts in federal spending before agreeing to allow more borrowing that would further increase the national debt.

He said the first step of budget cuts would slash spending by about one trillion dollars over the next 10 years. The proposed cuts "wouldn't happen so abruptly that they'd be a drag on a fragile economy," Obama said.

A second round of reductions would cut another 1.5 trillion dollars by 2021.

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