Today serves as a monumental day in the bitter battle between US Republicans and Democrats. Just hours ago, the House of Representatives passed the critical debt plan that will see the debt ceiling raised and significant cuts to government spending. The US had a deadline of August 2 to raise the debt-ceiling before it defaulted on loans and lost its AAA credit rating, a move which would have left the US economy in a precarious position.

Instead, members from both parties — 174 Republicans and 95 Democrats — agreed to a US$2.1 trillion dollars cut to spending over the next decade and a new bipartisan committee to be established who will report back to Congress in November with further plans to lower the deficit.

This is a two-phase debt plan. First, the initial US$957 billion in spending cuts, of which US$350 billion will be cuts to Defense. The second phase of the plan involves the 12-person bipartisan committee — made up of an equal amount of Democrats and Republicans, Senators and Representatives — who will recommend US$1.5 trillion worth of spending cuts by Thanksgiving.

It’ll be interesting to see which politicians are chosen to represent their party’s — and voter’s — interests in the bipartisan committee. “The main qualification for being chosen as a member or staffer for this commission will be that you were too ignorant of the economy to notice the $8tn housing bubble whose collapse brought on the current crisis. Fortunately, Washington has no shortage of policy wonks who fit this description,” declares Dean Baker in The Guardian.

This committee will have to delicately balance tax reform, one of the most contentious issues in US politics for big business and households alike. “In such a feverish atmosphere, it will take considerable skill and fortitude to solve tax-and-spending problems that have defied the good intentions of many since 1986, when the last comprehensive tax reform got done,” writes Kevin Drawbaugh for Reuters.

But who ‘won’ in this debt-ceiling raise deal? Can this be seen as a victory for Obama, who has long been criticised for his management of the economy? Or was it a win for the GOP, led on this deal by Speaker of the House John Boehner, who managed to get the deal passed with no tax cuts?

“People on the right are upset. People on the left are upset. People in the middle are upset,” admitted Democrats Senator Harry Reid, the majority leader.

No one is happy but both parties finally agreed put the country ahead of themselves, reports The New York Times:

“Passage came after weeks of brinksmanship and backroom dealing that left few satisfied in the more liberal or conservative wings of the House, but drew just enough from each party to put a compromise over the top in time, assuming the Senate goes along, to avert what might have become a calamitous default on the nation’s debt.”

The debt-ceiling won’t be renegotiated again until 2013 — assuming the bipartisan committee can find $1.5 trillion in cuts — partly to avoid this debate happening again before the next US presidential election. But that’s the same year that Europe will re-examine its funding and economies issues. “That could be the year when European nations default and the US slams on the brakes. What if the economy isn’t strong enough to take its medicine?” asks Philip Coggan in the Economist‘s Buttonwood blog.

There’s a lot of positives for liberals in this plan who are instead distracted with slamming Obama for not raising taxes, says Jay Newton-Small in Time, noting that the plan calls for just a 2% cut in spending by Medicare providers, big cuts have already been made to Defense and more are likely to come.

“In a world where the Tea Party didn’t exist, would this be a good bill for Democrats? Absolutely not. But considering that the trigger, commission, two-step process and discretionary budget cuts could’ve been a LOT worse — and actually were in Boehner’s version of the bill — this deal will be easier to swallow,” writes Newton-Small.

Boehner may have convinced the Republicans to compromise, but in a fascinating interview with Der-Spiegel, Tea Party co-founder Mark Meckler warns that Tea Party supporters support neither the debt plan — as it didn’t cut enough spending — nor Boehner’s future as Speaker of the House.

When questioned why the Tea Party didn’t support the plan, Meckler replied “Look closely at the plan: It proposes $22 billion in cuts in the upcoming fiscal year. That is ridiculously little. It is the equivalent in the United States of shutting off the lights on Friday night and reopening at your normal rate of spending on Monday.”

But cutting government spending just hurts an already depressed economy, argues Paul Krugman in The New York Times:

“In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.”

The deal still has to pass the Senate, who is expected to vote on Tuesday at noon, just hours before the final debt deadline.

In more positive news, Congresswoman Gabby Giffords — who was shot in the head by a gunman in January, leaving her with critical injuries — returned to a standing ovation in Congress to vote for the deal. Giffords was greeted with hugs and handshakes from both sides of the House, a far cry from the partisan bickering over the debt ceiling deal. As Adam Sorensen writes in Time, Giffords’ return served as an important moment of solidarity for lawmakers:

“The partisan battlefield of the House, which has played stage to empty symbolic votes and maneuvering for so many weeks, finally did something real on Monday evening. It paved the way to raise the debt ceiling too.”