U.S. President Barack Obama has signed a compromise law that will cut spending and raise the nation's borrowing limit, to avoid a possible unprecedented U.S. government default.
Mr. Obama signed the measure Tuesday, just after the the U.S. Senate voted 74 to 26 in favor of the bill and 10 hours before the government said it would have run out of money to pay all of its obligations.
Speaking in the White House Rose Garden shortly after the Senate vote, President Obama criticized lawmakers, calling the debt crisis “just one more impediment to the recovery.” He said it should not have taken the risk of a catastrophe to get lawmakers to work together.
Mr. Obama called the compromise a first step to ensuring that the country lives within its means, but warned further debt reduction cannot be achieved without eliminating tax breaks for big corporations and the wealthiest Americans. He said the focus must return to creating jobs for the many Americans still out of work.
Despite passing both the House and the Senate, the legislation has been roundly criticized as imperfect or inadequate by leading lawmakers. It allows the government to continue borrowing money through 2012 in exchange for spending cuts of almost $1 trillion over the next 10 years.
The package would also create a bipartisan budget committee that will seek up to another $1.5 trillion in deficit reduction. If the panel fails to reach an agreement, then the deal would trigger drastic spending cuts.
The Republican-led House of Representatives passed the bill Monday.
Before the Senate vote, Democratic Majority Leader Harry Reid said the legislation averts a disaster but criticized the bill because “the burden of what has taken place is on the middle class and the poor.” He blamed conservative Republicans with the Tea Party movement for preventing lawmakers from reaching a deal sooner
Republican Minority Leader Mitch McConnell said that getting to the compromise looked “messy.” But he also said it was just the “will of the people working itself out.” McConnell said while he is not satisfied with the cost-cutting measures in the bill, it is “a crucial step toward fiscal sanity.”
It is not clear if the deal contains enough spending cuts to avoid a downgraded credit rating.
Following the vote Tuesday, Fitch Ratings said the risk of the U.S. defaulting on its debts remains extremely low. But the agency also said the debt measure signed into law is just “a step in the right direction” and that it wants to see a credible plan to further reduce the U.S. budget deficit.
In comments broadcast earlier Tuesday, Treasury Secretary Timothy Geithner told ABC News he did not know what would happen to the country's rating.
Geithner said the result of the compromise legislation was good but the process of getting to the compromise was “terrible.” He said the political wrangling shook the confidence of many Americans, saying their faith in the country was “absolutely very damaged by this spectacle.”
Geithner said that while the deal would help the country's economy over the long-term, it does nothing to create jobs or spark immediate economic growth.
Standard & Poor's credit rating agency had threatened to downgrade America's AAA rating unless Congress passed at least $4 trillion in deficit cuts. A downgraded credit rating would increase the government's cost to borrow money, and could also raise interest rates on many consumer loans.
