With barely a day to act, US Congress leaders raced Monday to corral enough votes to pass a massive austerity plan that would avert a disastrous, first-ever debt default with ruinous global consequences.

The Republican-led US House of Representatives seemed on track for an evening vote, followed by the Democratic-held Senate, with the fate of the legislation still in doubt just after midday despite upbeat predictions from supporters.

"I never count my votes until they are cast. So I'm hopeful, but you know, we will have to see," Democratic Senate Majority Leader Harry Reid told reporters, adding: "I'm not here to declare victory. We have to get this thing passed."

The measure, needed to ensure the world's richest economy can pay its bills past a midnight Tuesday (0400 GMT Wednesday) deadline, raises the $14.3 trillion US debt ceiling and calls for $2.1 trillion in spending cuts over 10 years.

Early optimism on global markets had evaporated by midday on worries the deal could fall short of clearing the polarized US Congress or fail to prevent a painful downgrade of Washington's sterling Triple-A debt rating.

"It is certainly not a game-changing breakthrough, and will keep the possibility of a near-term rating downgrade alive," wrote Barclays Capital analysts, who called the accord "just a band-aid approach."

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.

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 President Barack Obama and his Republican foes.

Emerging from closed-door talks with House Democrats, Biden said he had gotten an earful of their "frustration" but insisted "I feel confident that this will pass."

All eyes were on the polarized House of Representatives, where liberal Democrats worried about the social safety net and archconservative "Tea Party"-allied Republicans demanded far more draconian government spending cuts.

"This deal is a sugar-coated Satan sandwich. If you lift the bun, you will not like what you see," Democratic Representative Emanuel Cleaver, who heads the Congressional Black Caucus, said on his Twitter feed.

Liberals were aghast that the plan relied on spending cuts and did not include increases in tax revenues from the rich and wealthy corporations, though Obama has called for letting tax cuts for the top brackets expire in January 2013.

Republican House Speaker John Boehner faced a critical test of his ability to rally his restive caucus, even as some Tea-Party-aligned lawmakers flatly rejected the deal.

Representative Michele Bachmann, a Tea Party favorite who is seeking the Republican presidential nomination, opposed the package saying it "spends too much and doesn't cut enough."

Piling pressure on Boehner, Democratic House Minority Leader Nancy Pelosi has stayed largely neutral about the legislation.

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. 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.

White House spokesman Jay Carney rejected Democratic criticism that the package does not raise revenue, saying that the special committee could recommend measures such as cuts in oil and gas subsidies.

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 about $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.

Japan, the second-largest foreign holder of US debt after China, hailed the deal. Beijing made no official comment, but its state-controlled television called the package "more pomp and ceremony than substance."

Russian Prime Minister Vladimir Putin, meanwhile, accused the United States of acting as a "parasite" on the world economy by living through debt rather than within its means.

In New York, the blue-chip Dow Jones Industrial Average slumped 0.34 percent at around 1915 GMT while the tech-heavy Nasdaq Composite was down 0.79 percent.

In Asian trade earlier Monday, Tokyo jumped 1.34 percent, Hong Kong put on 0.99 percent and Sydney advanced 1.65 percent while Shanghai gained just 0.19 percent on poor Chinese manufacturing data.

Meanwhile gold, the traditional safe haven in times of trouble, continued to hold near record levels, finishing at $1,623, down from the close Friday of $1,628.50.

Tweet

Related Links The Economy