Senate Passes Debt Deal, Ends Crisis Hours Before Default
Updated 4:40 p.m. ET | The White House has released a photo (above) of President Obama signing the debt compromise bill. Photographer Pete Souza has also released more behind-the-scenes images of the negotiations:
Updated 2:21 p.m. ET | After months of partisan contention in Washington, President Obama has signed a bipartisan bill to raise the national debt limit and avoid a potential government default and economic catastrophe.
The president signed the legislation, which cleared the Senate and House in the past day, privately in the Oval Office about an hour after the Senate passed it. The bill raises the U.S. debt ceiling but pledges more than $2 trillion in budget cuts over the next 10 years.
Updated 1:37 p.m. | President Obama said Tuesday afternoon that the emergency default-prevention bill that cleared both houses of Congress in the past day is merely a first step toward making sure the nation lives within its means.
The president said more must be done to rebuild the U.S. economy and called for more bipartisan cooperation in Washington, saying that it shouldn’t take the risk of an economic catastrophe to get the two parties to work together.
“Voters may have chosen divided government, but they sure didn’t vote for dysfunctional government,” he said. “They want us to solve problems.”
Mr. Obama said that lawmakers must find a balanced approach to lowering the deficit, which would include some adjustments to Medicare and reforming the tax code to make the wealthy pay more.
The White House says the president will sign the bill as soon as it arrives on his desk.
President Obama said he expects tax reforms to emerge from deliberations around a new joint bipartisan committee to be established by the legislation, and that a “balanced approach” in which the wealthier pay more taxes is needed for more deficit reduction.
As unemployment remains a chief concern of Americans and the administration, the president said uncertainty from the debt debate has been an impediment to business and said that economic recovery had also been disrupted by unforeseen problems such as the Japan earthquake.
The president urged Congress to pass stalled trade bills and said he wants unemployment benefits extended. He also called on lawmakers to end the impasse that led to a partial FAA shutdown before the Senate adjourns.
Original post 12:36 p.m. ET | The Senate on Tuesday afternoon passed the debt-limit increase and deficit-reduction package passed late Monday by the House of Representatives, ending months of uncertainty over whether Congress and President Obama would be able to agree on a way to prevent an economic catastrophe created entirely by the political system in Washington, D.C.
In a bipartisan vote of 74-26 represents a big victory for House Speaker John Boehner and his leadership team in the House and allies in the Senate, who demanded that spending be cut by an equal amount to the increase in the debt ceiling. President Obama favored a “clean” increase to the debt limit, then later some tax increases in any deal, but he did not get either.
A failure to allow the Treasury Department to borrow more money after the $14.3 trillion debt ceiling was reached could have caused interest rates to spike, which would make borrowing costs for all Americans increase and would have left the government unable to pay a substantial amount of its bills.
The bill now heads to President Obama for his signature, but it’s uncertain when that will happen. The president is speaking Tuesday afternoon in the Rose Garden.
The plan cuts some $2.1 trillion from the federal deficit over 10 years, according to the Congressional Budget Office, and allows the debt limit to be increased in two stages that should last until after the 2012 elections. A major component of the deal is the creation of a 12-member committee made up of members of the House and Senate from both parties. It will be charged with finding at least $1.5 trillion in additional deficit reductions later this year. If their recommendations are not passed by Congress, that will trigger automatic cuts to defense and non-defense domestic spending.
The deadline for raising the debt ceiling before the nation suffered a potential economic catastrophe was midnight Aug. 3.
Minority Leader Mitch McConnell argued on the Senate floor that the debt limit debate Americans witnessed wasn’t gridlock, but a sign that the will of voters in 2010 was working its way into the political system.
“The American people sent a wave of new lawmakers to Congress in last November’s election with a very clear mandate: to put our nation’s fiscal house in order. Those of us who’d been fighting the big-government policies of Democrat majorities in Congress welcomed them into our ranks. Together we’ve held the line. And slowly but surely, we’ve started turning things around,” McConnell said.
Senate Majority Leader Harry Reid focused his floor speech on the fact that the country averted a disaster.
“Our country was literally on the verge of a disaster. On the brink of a disaster. With one day left we were able to get together and avert that disaster. This compromise that we’ve reached is not perfect,” Reid said. He also responded to McConnell’s praise of the new direction taken by the Congress since the 2010 elections.
“The American people are not impressed with the no new revenue. The vast majority of Democrats, independents and Republicans think this arrangement that we’ve just done is unfair, because the richest of the rich have contributed nothing to this. The burden of what has taken place is on the middle class, on the poor,” Reid said on the Senate floor.
The Senate and House votes came after a dramatic weekend of closed-door negotiations and public posturing. House and Senate leaders had been meeting with President Obama at the White House in July before talks broke down. With time running out before a default and dramatic overnight reduction in government funding, Senate and House leaders held intense negotiations in order to reach a deal Sunday evening. On Monday, despite unhappy liberal Democrats and conservative Republicans, the deal passed easily in the House.
The next step is the selection of the 12-member joint committee, which will have enormous influence over the next series of cuts. Party leaders in both chambers will have the responsibility of choosing those members in the coming days.