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Last updated: August 2, 2011 6:35 pm
President Barack Obama has signed the debt limit legislation which allows the US to avoid a default by Tuesday midnight, after stressing the need for compromise in the next phase of wrangling over spending cuts.
US debt ceiling deal was passed in the Senate by a strong majority of 74 to 26 on Tuesday afternoon, sealing the arrangement reached by the political parties and passed by the House of Representatives on Monday evening.
In a speech from the White House after the Senate vote, the US president said he remained committed to reform of the tax code.
He said the deal was “just the first step ... a compromise as both parties work together on a long-term plan to cut the deficit”.
“Since we can’t close the deficit with just spending cuts, it will need a balanced approach where everything is on the table,” the president said.
The US economy had endured several knocks, including an earthquake in Japan, headwinds from Europe, the Arab spring and high oil prices, “all of which was challenging for the recovery”.
“It didn’t need Washington to come along with a manufactured crisis to make thing worse,” he said. The debt talks had been “unsettling and an impediment to the full recovery we need, and something we could have avoided entirely”.
Earlier the Senate Democratic leader, Harry Reid, said in a press briefing that the deficit reduction plan represented a bipartisan approach, with both sides at pains to stress the deal was a compromise.
The legislation cuts spending by $2,400bn over 10 years and increases the debt ceiling until 2013.
In the lead-up to the dramatic vote in the House on Monday, lawmakers on both sides of the aisle said they were determined to see the bill pass the lower chamber for the sake of the nation.
Even though there was a sense of calm in Washington that the deal would be passed following Sunday’s agreement between Mr Obama and congressional leaders, there was plenty of last-minute drama to keep investors on edge.
However, by the end of the vote, the House chamber erupted in bipartisan applause, not only because the measure had been approved by a vote of 269 to 161, but because Gabrielle Giffords, the Democratic congresswoman from Arizona, who was shot in the head in January, appeared on the floor of the House for the first time since then to cast her ballot.
Ahead of the House vote, John Boehner, the Republican speaker, and Nancy Pelosi, the top Democrat in the House, seemed to be engaged in a silent dance for most of the day, with each leader suggesting the other had a responsibility to deliver sufficient votes for the deal.
The White House and some Democrats, in the meantime, insisted that the legislation created an opportunity for future tax increases on the wealthy as a way to sell the agreement to reluctant liberals, while Republicans reiterated their claim that there were no tax rises in the deal to assuage conservatives.
Key members of the Republican majority, including some of the party’s most ardent fiscal conservatives, said they would support the compromise, even though it was not ideal.
Mike Pence, Indiana Republican and Tea Party favourite, said it was “not so much a good deal but a good start” and the “ship of state [was] turning ever so slightly towards that lone star of fiscal responsibility”.
In final speeches, many Democrats, who felt they were on the losing end of the debt compromise, expressed disgust that the country had been driven to the brink of disaster, blaming Republicans who had put ideology before country.
Steny Hoyer, the number two Democrat in the House, said he supported the bill but that Congress had missed a “great opportunity” to seal a grand bargain that have would dramatically shifted the US’s fiscal outlook.
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