Obama signs US debt bill into law

2 August 2011 Last updated at 14:59 ET

President Barack Obama has signed legislation to increase the US debt ceiling and avert a financial default after Congress voted in favour of a bipartisan compromise deal

The bill cleared its final hurdle in the Senate by 74 votes to 26.

The law raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn, and makes savings of at least $2.1tn in 10 years.

The deal was struck after negotiations between Republicans, Democrats and the White House went down to the wire.

The signing of the law came roughly 10 hours before Washington was due to run out of time.

Without a deal to raise the debt ceiling, the US would have been unable to meet all its bills, according to the US treasury department.

Speaking at the White House shortly after the decisive vote in the Senate, President Obama said it was “pretty likely that the uncertainty surrounding the raising of the debt ceiling for businesses and consumers has been unsettling”.

“It’s something we could have avoided entirely,” he added.

The president said more action was needed, saying it was impossible for the US to “close the deficit with just spending cuts”.

He urged Congress to now look to boost the economy through measures to create jobs and increase consumer confidence.

“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” President Obama said, reprising one of his key themes of recent weeks.

End of gridlock

In Tuesday’s Senate vote, the debt deal was opposed by six Democrats and 19 Republicans.

Some Democratic and Republican lawmakers have bitterly opposed the legislation in recent days, saying it offered too much of their opponents’ agenda.

But the legislation still received many of their votes in the House and Senate as lawmakers heeded warnings that the US would default on its debts if nothing passed through Congress.

“This is a time for us to make tough choices as compared to kick the can down the road one more time,” Republican Senator Jerry Moran said following the vote.

Speaking after the vote in the Senate, Democratic leader Harry Reid echoed the discontent of some in Congress, saying “neither side got all it wanted, each side laments what it didn’t get”.

“Today, we made sure that America will pay its bills, now it’s time to make sure all Americans can pay theirs,” Mr Reid added.

Before the bill’s passage on Tuesday, Senate Republican leader Mitch McConnell praised the direction of the legislation, saying Congress had “engaged in an important debate” in recent weeks.

“The push-and-pull people saw in Washington this week was not gridlock, it was the will of the people working itself out,” Mr McConnell said.

“Together, we have a new way of doing business in Washington,” he added.

The legislation passed in the House of Representatives by a clear majority on Monday evening.

Triggers in place

The deal, hammered out over the weekend after weeks of feverish speculation, raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn, and makes savings of at least $2.1tn in 10 years.

In a key point for President Obama, the bill would raise the debt ceiling into 2013 – meaning he would not face another congressional showdown on spending in the middle of his re-election campaign next year.

The compromise deal deeply angered both right-wing Republicans and left-wing Democrats.

Liberals have been unhappy that the plan relies on spending cuts only and does not include tax rises for the wealthy, although Mr Obama could still let Bush-era tax cuts for the top brackets expire in January 2013.

House Republicans were displeased that the bill did not include more savings.

Announcing the deal on Sunday evening, President Obama said that, though it was not the one he would have preferred, it was a “serious down-payment” on the US deficit.

The deal will enact more than $900bn in cuts over the next 10 years.

It will also establish a 12-member, bipartisan House-Senate committee charged with producing up to $1.5tn of additional deficit cuts over a decade.

Analysts have said the cuts will probably come from programmes like federal retirement benefits, farm subsidies, Medicare and Medicaid.

Economists have said that failure to pass the debt deal would have shaken markets around the globe.

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