Obama signs debt limit bill after nasty fight

President Barack Obama signs the Budget Control Act of 2011 in the Oval Office, Aug. 2, 2011.

/ White House

Updated 3:12 p.m. Eastern Time

President Obama signed a hard-fought, last-minute compromise bill to avert economic catastrophe Tuesday, saying the deal to cut spending and increase the nation's $14.3 trillion debt limit marked an "important first step to ensuring that as a nation we live within our means."

The bill, he said, was the outcome of a "long and contentious debate" to avoid a man-made economic disaster that he described as creating "unsettling" economic uncertainty. He said that while voters chose divided government, "they sure didn't vote for dysfunctional government."

"It shouldn't take the risk of default, the risk of economic catastrophe, to get folks in this town to get together and do their jobs," the president said. He added: "Our economy didn't need Washington to come along with a manufactured crisis to make things worse."(watch Mr. Obama's full remarks at left)

Mr. Obama signed the legislation Tuesday afternoon after making remarks in the White House Rose Garden. It will effectively increase the nation's borrowing authority through the end of next year and promises more than $2 trillion in deficit reduction over ten years.

Now that the debt limit fight is effectively over, Mr. Obama and congressional Democrats say they will pivot to a focus on jobs and the economy, which they say should be Congress' top priority.

"We've got to do everything in our power to grow this economy and put Americans back to work," Mr. Obama said Tuesday. He called on Congress to extend middle class tax cuts and unemployment benefits, pass trade deals and plow money into infrastructure when it returns from its August recess.

The Obama administration had warned that if lawmakers did not act on the debt limit by midnight, the nation would no longer be able to pay many of its obligations - potentially including social security checks, military pay and other payments - and could default on its debt, causing worldwide economic chaos as well as increased borrowing costs for Americans.

CBSNews.com special report: America's debt battle

The Senate passed the bill 74-26 shortly before Mr. Obama made his remarks, easily surpassing the 60 votes needed to overcome a filibuster. That vote followed Monday night passage in the House, which included a surprise affirmative vote by Democratic Rep. Gabrielle Giffords, who is recovering from an assassination attempt. 

Both fiscally-conservative Republicans and liberal Democrats rejected the deal, with the former saying it does not go far enough to address the nation's debt and deficit crisis and the latter complaining it cut too much and did not include revenue increases. Though the deal will reduce the deficit by trillions of dollars, it still leaves the nation facing a projected $22 trillion debt ten years from now - an increase of more than $7 trillion from today. Ratings agencies have said that they could still downgrade the nation's Triple-A credit rating even with the deal.

Mr. Obama had sought a "grand bargain" that would have included more than $4 trillion in deficit reduction and included both revenue increases, cuts to entitlement programs and tax reform. But against a backdrop of Republican opposition to any revenue increases and Democratic opposition to significant cuts to entitlements, closed-door negotiations over the larger deal broke down.

The bill will immediately increase the debt limit by roughly $400 billion immediately and then another $500 billion in the fall. It will also create a 12-person bipartisan congressional committee tasked with coming up with recommendations for $1.5 trillion in further deficit reductions by Thanksgiving. Those reductions could include cuts from defense spending and social safety net programs, as well as changes to the tax code.

If the recommendations are not created or approved by Congress by the end of the year, it will trigger more than $1 trillion in automatic spending cuts unless Congress sends a balanced budget amendment to the Constitution to the states.

A summary of the debt ceiling compromise
Boehner: Debt committee could recommend tax hikes
Deal sets up December showdown, despite talk otherwise

Mr. Obama called on that committee to take a "balanced approach" -- one that includes revenue increases -- with "everything on the table."

"Yes, that means making some adjustments to protect health care programs like Medicare so they're there for future generations. It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share," he said. "And it means getting rid of taxpayer subsidies to oil and gas companies and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses."

In a statement, House Speaker John Boehner called passage of the bill "a positive step forward that begins to rein in federal spending, but it's only a step."

"We should save the celebration for when a Balanced Budget Amendment is ratified, the deficit is fixed, and our economy has returned to creating jobs," he said.

Senate Majority Leader Harry Reid said after the Senate vote that "Neither side got what they wanted."

"Each side laments some of the things we had to give up, but that's the way it is," he said.

From CBS Moneywatch.com

Will U.S. credit rating be downgraded despite deal?
How The Debt Deal Impacts Your Retirement
Alain Sherter: The U.S. Is Repeating Europe's Mistakes

Watch Bob Schieffer's analysis of Mr. Obama's remarks below:

9 Photos

Facts about the debt

[6591Hou]

The factions are still fighting against each other and against themselves, the questions left unresolved are still:

What roles do government spending and government revenue have to play in reducing our deficit? On one hand you have money going out and on the other you have the money that the government is taking in, the continuing argument is about what should being paid out and where the incoming revenue should come from.

What constitutes a tax increase? Is the ending of a temporary reduction of taxes ('temporary' meaning it has an assigned expiration date) truly a tax increase or is it really just the end of a deferred tax rate? The similar situation is where consumers receive credit cards with an 'introductory' rate which expires after a period of time and then the interest rate increases to the normal rate.

Who should pay higher taxes? The corporations? People who inherit from their family members? People who save or invest? Anyone who makes more than????? Where does the government draw the line at reaching into the citizen's pockets and pulling out more cash? The popular notion is to keep the government out of our bedrooms, out of our bodies, out of a lot of areas of our life - but yet there is the desire to have the government reach deeper into wallets and bank accounts from those that some would deem 'able to afford it'.....who gets to make that call?

[peter_out]

The Bill authorizes up to $2500 million million additional national debt. It is not intended to be a checking account.

The August shortfall on "obligations" is $20 thousand million. Somebody better keep their hand on our collective wallet that is now in the President's ass pocket.

[sandy e.2710]

I realize that the deficit has to be dealt with, but I am very concerned that the economic problems in this country will not only continue, but be worsened by the bill that was passed.Because the Tea Party Republicans insisted that the raising of the debt ceiling be tied to the budget, a bad bill was pieced together,and forced through congress, at the eleventh hour, just to keep us out of default. What we are seeing with the defunding of the FAA , and its employee layoffs, is an example of what is likely to happen on a much larger scale, and permanently.There could be everything from military base closures, effecting thousands of workers, to less efficient, and eventually more expensive health care involved for the elderly and disadvantaged.An already ailing job market will not be able to absorb even more unemployed people. The children of many seniors may find themselves having to take on a greater responsibility for their parents' medical care, when they are already struggling to make ends meet.These are just two examples of the many negative repercussions of this bill, and because there isn't a revenue component, remedying these problems will be very difficult, if not impossible.The Tea Party Republicans' tactics proved to be winning for their cause, but I think at a great price to this country.I think that we will see this same movie time and time again, as long as they are in office, no matter how divisive , and destructive it is to us as a people.

[Alex_Votocracy]

W/ all this fighting can we really trust either side to make the best decisions for us as a people? A great article about a change in the Gov. http://******/pJWViG

[tsigili]

Yeah......but before he even singed it......he was already announcing NEW runaway spending.

There won't be a dime left, of that 2.4 trillion, in spending limit, by the time he leaves office in 2013.

Obama's goal is to bankrupt this country, and he is very much succeeding.

[oldman67]

Now that the show is over Obama has 2.7 trillion dollars to spend until this happenes again next year. This is the 79th time the debt ceiling has been raised. Visit the Cato Institute site and see nothing has really changed.Spending for Defense will change much less than most believe.The charts and information and suggestions provided shows their upcoming plans for all Federal Government agencies.The Cato Institute who is the government advisor say the US must change tatics and stop nation building.

[1American]

After observing the shenanigans of the left in both the House and Senate, IMHO the Tea Party will only grow stronger. My main concern is (with the exponential increase in vitriol from the far left) the safety of some of the conservative candidates may be at risk.

[marilynr43]

When people see their SS and Medicare get cut, government workers lose their jobs, hospitals and other health care providers get a huge cut in Medicare reimbursement resulting in pay cuts to doctors and nurses (all while tax cuts andsubsidies to the rich and big business are preserved), They will realize what a mistake they made in voting in the Tea Party. Especially when they also see the Job Creators killing more jobs in the private sector. People aren't stupid (as you are assuming).

[JWinATL]

The two largest increases to the debt ceiling have been under Obama's watch - $2.4 trillion now and $1.9 trillion in 2010. How can you lefties not see that? Google the debt ceiling.

I don't really have a problem with the sunsetting of the Obama tax cuts, but I don't think our current tax system will solve our problems. We need a new method of taxation. Sunsetting the tax cuts will do little to increase revenue since most of the "evil rich" are able to legally avoid taxes. You lefties are jealous of their wealth, not their income. They don't have wages; they have capital gains. This class warfare has to cease. And, why not have the "less fortunate" have some skin in the game? Eliminate income taxes, gas taxes, cigarette taxes, etc., and institute a federal sales tax, such as that promoted in the Fair Tax. Maybe if EVERYONE paid for the government, they wouldn't be so glib about spending. We have a spending problem. A study of the effects on shrimp of using a treadmill??? Seriously???

[wardove]

Wrong we are sick of the greedy corruption of this country!!

[wardove]

Must be nice to have a fall guy to blame, he did not start the wars or come up with tax cuts that only benefit the rich .Our country is so misinformed turning on each other.Its time for change , its time to do what is right for our country and if we all disagree maybe its time for civil war.I am so sick of greed ,i cry when i look at the photos of famine stricken nation and then i get mad because this is what the world is turning into.Most of us dont even know what is right and wrong anymore.

[Zann-Zel]

Don't forget Ranger...all of us in the South may have our guns and know how to shoot - but we don't all agree with you! Good Morning! : )

[RobAla]

It does not matter who gave up the most for the raising of the debt limit. What matters is for politicians from both parties in Washington to readjust federal spending to a level where we will stop raising the debt limit. This has to stop.
1) $14.4 TRILLION national debt, and even with this deal the federal government will continue to over spend
2) $300 BILLION each year just to pay the interest alone, is what the debt costs the American taxpayers. We haven't even begun to talk about paying down the debt.
3) The deficit spending is causing the devaluation of the US dollar
4) There is a strong chance that the devaluation of the US dollar may bring about hyper-inflation. This would hit the poor and those on fixed incomes (the elderly) the hardest.
5) If Congress really lives up to NOT raising taxes, there is a chance business will turn around. However, the biggest enemy of business success right now is the stupid health care law that is about to impose huge expenses on business. If this idiotic law was repealed, we would see the horrible 9% unemployment rate begin to drop.

The practice of over spending by Washington must come to a stop, and hopefully this deal will turn the nation in that direction. We have been traveling in the wrong direction for some time.

[IndependentinNH]

1) Thank you Alan Greenspan for lowering interest rates too low, for too long just to juice up the economy way back when.That got us all used to depression era yields on our savings held in banks for the past two years.
2)Thanks mortgage lenders, Goldman Sachs, AIG, Lehman Brothers, Moody's and S&P, and too many others to mention, for the 08 crash. That crash was exciting, fun and memorable. Now we get to entertain ourselves by experiencing extreme fear at the thought of a banking system so weak that Ben Bernanke has to keep the borrowing rate near zero so that the lenders won't go under, and so that the real estate market will be kept alive, barely--but alive
3) Thanks, Mr. Boehner, Mr. McConnell, and Mr. Bush, for debting, lowering taxes, and not worrying about it, because when you debt, well it's not the same as when others debt.
4) Thanks Republican party for keeping the pork on the table, that is to say, for keeping a bloated Defense Department budget off the list of WASTEFUL SPENDING TO BE CUT. When you waste money, well that's not the same as when others waste money.
5) Thanks tea party, for raising the founding fathers from the dead. Such an amazing event has not been witnessed for over two thousand years. And with the raising of our perfect founders, we, the people, now know that all of our problems are due to wasteful government spending (Democrats Only), lazy welfare recipients, greedy public employees (excluding Republican house and senate members) and finally, dumb union people.

Lest I forget, thanks, FDIC for taking over a record number of failed banks this year, even though you now don't have the money to do so, thanks anyway. Because, if you did not step in, we, the people, would know exactly what it felt like to be a free citizen of the USA during the late 1920s and early 1930s, who, upon walking to the bank to withdraw a bit of money for the week, discovered that the free market was working just fine: alas bankruptcy is a sad fact of capitalism. We, the people, don't need any social compacts whatsoever, we can manage just fine, each on his or her own. What is the value of trust, surely not as much as gold.

[Socialization]

This election add for Obama fails to mention that he submitted a budget a few short months ago that had no cuts and was 1.5 Trillion in the red for this year and was defeated by over 90% of the Senate.

This add makes Obama seem like the great compromiser and deficit hawk, not the partisan liberal political hack he is that has sent the Independant voters against him in a staggering decline in his support.

With the country solely focused on the deficit and with the (2) stage process this bill requires, it will keep it in the focus till election day in 2012 and that is bad news for Obama.

The economy is getting worse and unemployment remains stagnant and will increase soon. The rate of growth restated in Q1 from 1.9% to .04% and Q2 at 1.3% for now until it is restated shows we are actually heading into the ditch of another recession.

With this econonmic performance, anyone running against this fool in the White House wins hands down. That is why the mantra form the liberal press from now on will be about "terrorist" extremist conservatives in the Tea Party etc. Etc.

It will not work. Obama will be judged on the results and they are very bad....

[IndependentinNH]

This independent, fiscal conservative is pro Obama. Was in 2008, still am today.

[ajvw]

minor correction - nobama's budget was defeated in the democratic controlled senate 97-0.