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Senate passes, Obama signs debt deal

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Senate passes, Obama signs debt deal

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The U.S. Senate passed a controversial increase in the federal government's debt limit Tuesday, 74-26. President Obama quickly signed it into law.

Arizona's Republican senators voted for the bill. Sen. John McCain released a lengthy statement explaining his support for the bill (sidebar), but staffers at the office of Sen. Jon Kyl declined to comment on the vote.

Obama, speaking after the Senate vote, called the measure an "important first step to ensuring that as a nation we live within our means."

The "long and contentious debate" leading up to the compromise measure was "unsettling," he said. Americans "sure didn't vote for dysfunctional government" when they chose divided government (see complete statement below).

"We have seen in the past few days that Washington has the ability to focus when there is a timer ticking down and when there is a looming disaster. 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," Obama said.

Tax increases on the wealthy must be part of a future "balanced approach" to deficit reduction, he said.

The Budget Control Act of 2011 raises the debt limit by $2.4 trillion while instituting long-term cuts in the federal budget. The government faced a Tuesday deadline to avoid defaulting on debts it has already incurred.

"This is an historic vote and it's one that has involved a lot of emotion and a lot of soul searching and a lot of hard work," said Sen. Richard Durbin of Illinois, the No. 2 Democrat in the Senate, the Los Angeles Times reported.

The deal immediately raises the debt ceiling, and imposes $900 billion in spending cuts over 10 years. Lawmakers agreed to find another $1.5 trillion in cuts before the end of the year.

Sen. John McCain voted for the bill, but expressed concerns about cuts to the defense budget.

"What this plan does represent is a fiscally sound path forward, and therefore I support its adoption," the Arizona Republican said in a statement before the vote.

Senate Minority Leader Mitch McConnell, R-Ky., said that conservative Tea Party members have succeeded at pushing their agenda, reported ABC News:

"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," McConnell said, "And I want to assure you today that although you may not see it this way, you've won this debate."

McConnell's "boast" didn't sit well with Senate Majority Leader Reid, D-Nev., ABC reported:

"I welcome them all," Reid said of the new Tea Party senators, "but as result of the Tea Party direction of this Congress, these last few months has been very very disconcerting and very unfair to the American people."

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," the House Republican leader said in a statement.

The Senate vote followed the House's 269-161 passage of the deal on Monday night. The bill passed the House with the support of 174 Republicans and 95 Democrats.

Rep. Gabrielle Giffords, D-Tucson — in her first appearance back on the House floor since she was shot in the head on Jan. 8 in Tucson — was one of only two Arizona representatives to vote yes on the Budget Control Act of 2011, along with Rep. Paul Gosar, R-Flagstaff.

The U.S. faced a Tuesday deadline to raise the debt ceiling or risk the first full-scale default in the country's history. Global markets rallied Monday on news that Washington had agreed on a deal, but U.S. stocks saw a week of losses before the deal was announced late Sunday

The deal gives the Treasury an additional $400 billion in immediate borrowing power, with $500 billion more in the fall. Another increase would come in 2012, giving the government the ability to pay its bills through 2013.

The 10-year, $917 billion in cuts begin with $21 billion in October.

A congressional panel will be charged with cutting another $1.2 to $1.5 trillion over the next decade.

Obama's statement

THE PRESIDENT: Good afternoon, everybody. Congress has now approved a compromise to reduce the deficit and avert a default that would have devastated our economy. It was a long and contentious debate. And I want to thank the American people for keeping up the pressure on their elected officials to put politics aside and work together for the good of the country.

This compromise guarantees more than $2 trillion in deficit reduction. It's an important first step to ensuring that as a nation we live within our means. Yet it also allows us to keep making key investments in things like education and research that lead to new jobs, and assures that we're not cutting too abruptly while the economy is still fragile.

This is, however, just the first step. This compromise requires that both parties work together on a larger plan to cut the deficit, which is important for the long-term health of our economy. And since you can't close the deficit with just spending cuts, we'll need a balanced approach where everything is 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. 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.

I've said it before; I will say it again: We can't balance the budget on the backs of the very people who have borne the biggest brunt of this recession. We can't make it tougher for young people to go to college, or ask seniors to pay more for health care, or ask scientists to give up on promising medical research because we couldn't close a tax shelter for the most fortunate among us. Everyone is going to have to chip in. It's only fair. That's the principle I'll be fighting for during the next phase of this process.

And in the coming months, I'll continue also to fight for what the American people care most about: new jobs, higher wages and faster economic growth. While Washington has been absorbed in this debate about deficits, people across the country are asking what we can do to help the father looking for work. What are we going to do for the single mom who's seen her hours cut back at the hospital? What are we going to do to make it easier for businesses to put up that "now hiring" sign?

That's part of the reason that people are so frustrated with what's been going on in this town. In the last few months, the economy has already had to absorb an earthquake in Japan, the economic headwinds coming from Europe, the Arab Spring and the [rise] in oil prices — all of which have been very challenging for the recovery. But these are things we couldn't control. Our economy didn't need Washington to come along with a manufactured crisis to make things worse. That was in our hands. It's pretty likely that the uncertainty surrounding the raising of the debt ceiling — for both businesses and consumers — has been unsettling, and just one more impediment to the full recovery that we need. And it was something that we could have avoided entirely.

So, voters may have chosen divided government, but they sure didn't vote for dysfunctional government. They want us to solve problems. They want us to get this economy growing and adding jobs. And while deficit reduction is part of that agenda, it is not the whole agenda. Growing the economy isn't just about cutting spending; it's not about rolling back regulations that protect our air and our water and keep our people safe. That's not how we're going to get past this recession. We're going to have to do more than that.

And that's why, when Congress gets back from recess, I will urge them to immediately take some steps — bipartisan, common-sense steps — that will make a difference; that will create a climate where businesses can hire, where folks have more money in their pockets to spend, where people who are out of work can find good jobs.

We need to begin by extending tax cuts for middle-class families so that you have more money in your paychecks next year. If you've got more money in your paycheck, you're more likely to spend it. And that means small businesses and medium-sized businesses and large businesses will all have more customers. That means they'll be in a better position to hire.

And while we're at it, we need to make sure that millions of workers who are still pounding the pavement looking for jobs to support their families are not denied needed unemployment benefits.

Through patent reform, we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses — which holds our whole economy back. And I want Congress to pass a set of trade deals — deals we've already negotiated — that would help displaced workers looking for new jobs and would allow our businesses to sell more products in countries in Asia and South America, products that are stamped with the words "Made in America."

We also need to give more opportunities to all those construction workers out there who lost their jobs when the housing boom went bust. We could put them to work right now, by giving loans to private companies that want to repair our roads and our bridges and our airports, rebuilding our infrastructure. We have workers who need jobs and a country that needs rebuilding; an infrastructure bank would help us put them together.

And while we're on the topic of infrastructure, there's another stalemate in Congress right now involving our aviation industry which has stalled airport construction projects all around the country and put the jobs of tens of thousands of construction workers and others at risk -– because of politics. It's another Washington-inflicted wound on America, and Congress needs to break that impasse now –- hopefully before the Senate adjourns -– so these folks can get back to work.

So these are some things that we could be doing right now. There's no reason for Congress not to send me those bills so I can sign them into law right away as soon as they get back from recess. Both parties share power in Washington, and both parties need to take responsibility for improving this economy. It's not a Democratic responsibility or a Republican responsibility; it is our collective responsibility as Americans. And I'll be discussing additional ideas in the weeks ahead to help companies hire, invest and expand.

So, we've seen in the past few days that Washington has the ability to focus when there's a timer ticking down, and when there's a looming disaster. It shouldn't take the risk of default -– the risk of economic catastrophe -– to get folks in this town to work together and do their jobs. Because there's already a quiet crisis going on in the lives of a lot of families, in a lot of communities, all across the country. They're looking for work, and they have been for a while; or they're making do with fewer hours or fewer customers; or they're just trying to make ends meet. That ought to compel Washington to cooperate. That ought to compel Washington to compromise, and it ought to compel Washington to act. That ought to be enough to get all of us in this town to do the jobs we were sent here to do. We've got to do everything in our power to grow this economy and put America back to work. That's what I intend to do, and I'm looking forward to working with Congress to make it happen.

Thanks very much, everybody.

Janet Rose Jackman contributed to this report.

McCain's statement

U.S. Senator John McCain on Tuesday submitted the following statement for the record on the U.S. Senate's passage of the Budget Control Act of 2011:

Mr. President, I support the legislation before us today to raise the debt ceiling and at the same time curb government spending without raising taxes. The United States cannot default on our obligations and this bill prevents that from happening. This deal is not perfect. It is not what I would have written and I have grave concerns about the cuts to our Nation's defense spending that may have to occur as a result of this bill's passage.

What this plan does represent is a fiscally sound path forward, and therefore I support its adoption. I applaud the courageous leadership of Senator McConnell and Speaker Boehner. They have guided Republican members on both sides of the Capitol with tremendous skill and integrity, and fought hard to ensure that our Party's core principles were not negotiated away. I am proud of them, and I thank them. And I would be remiss if I did not also express my gratitude to Majority Leader Reid. He has a very difficult job in this body, and he deserves a tremendous amount of credit for helping get us to this point. He fought hard for his caucus and their priorities, and I congratulate him on successfully negotiating a fair compromise on their behalf.

While I will support this bill, I have a great deal of concern about the direction this compromise takes defense spending. I have said many times, defense spending since 9/11 -- which was preceded by nearly a decade of drastic reductions in military personnel, equipment, and readiness -- is not the cause of the economic dilemma in which we find ourselves. Cutting defense so deeply that long-term, catastrophic damage to our national security interests would result will not solve our deficit spending and debt problem.

Since this year began, the President has already asked the Defense Department to cut more than $178 billion by finding efficiencies and taking top-line reductions in proposed defense spending over the next five years. But this compromise deal before us will go much further, with initial defense cuts of about $350 billion over 10 years as part of the initial agreement to raise the debt limit by just over $900 billion.

The bigger threat of cuts to national security spending, however, will come not during this first round, but through the actions of the Joint Committee this bill establishes to find another $1.2 to $1.5 trillion in cuts as an offset to the next increase in the debt limit that will be required to get us from early 2012 through the balance of the year and into 2013. If the joint committee cannot agree on a package of cuts that can be passed in both the House of Representatives and the Senate and signed into law by the President, then a sequestration process would come into play that would automatically cut both defense and non-defense spending in order to pay for the next $1.2 trillion in debt ceiling increases. Such an across-the-board sequestration of defense funding levels could add another nearly $500 billion to the roughly $350 billion in cuts over the next 10 years.

At his confirmation hearing on July 26, General Martin Dempsey, who has been nominated to be the next Chairman of the Joint Chiefs of Staff, testified that cuts above the $400 billion in defense spending that were already being studied would be quote, 'extraordinarily difficult and very high risk.' I agree. But what concerns me most about our current debate is not just the enormous size of the potential reductions, but that the defense cuts being discussed have little to no strategic or military rationale to support them. They are essentially just numbers on a page. Our national defense planning and spending must be driven by considered strategy, not arbitrary arithmetic.

These defense cuts, initially about $350 billion over 10 years -- but, especially those that could result from sequestration that could amount to another $500 billion -- reflect minimal, if any, understanding of how they will be applied, or what impact they will have on our defense capabilities or our national security. While Secretary Panetta has made it clear that a comprehensive review will precede any decisions he makes on further defense cuts, the Congress currently has no specific indication of how proposed cuts would impact the size of our military forces, what changes they would require to our compensation system, what equipment and weapons would have to be cancelled as a result, or what additional risk to the readiness and modernization of our forces and their equipment we would have to accept. If Congress is to make informed decisions about our national defense spending, we need information like this, and it will have a crucial impact on how the joint committee created under this compromise goes about its work. And based on that sort of information, we must do everything we can to avoid an exercise in blind sequestration of defense funds that could come into play if the joint committee cannot find a way to find further cuts of $1.2 trillion or more that can be enacted into law.

Mr. President, for many months we have been engaged in a political tug-of-war over whether or not we should raise the debt limit and allow the President greater borrowing authority. I joined my colleagues on this side of the aisle in our insistence that any increase in our debt ceiling be accompanied by meaningful, real cuts in spending - not just typical Washington-style smoke and mirrors. I believe we achieved our goal with this compromise. The deal before us provides at least one dollar of actual spending cuts, not gimmicks, for each dollar in debt limit increases. It doesn't raise a single dollar in taxes. By including upfront cuts, a Joint Committee, a balanced budget amendment (BBA) vote, the debt disapproval process and sequesters, it continues the pressure on the President and Congress to continue cutting spending through the next election and beyond.

Some of my colleagues from the other side of the aisle have described the debate on this issue as a 'manufactured crisis.' They cite the fact that, in the past, we routinely raised the debt ceiling with little or no debate -- having done so at least ten times in the last ten years. Well, I say to my friends, you are leaving out one very critical detail in your analysis -- a detail that makes our current situation anything but 'routine' -- and that is this: Never before in the history of this great nation has our debt been $14.6 trillion. Never before in our history have we faced the possibility of having our credit worthiness downgraded due to our inability to control our spiraling debt -- which could very well decimate the good faith and credit of the United States and have a severe impact on our standing in the world.

Mr. President, this measure represents the beginning -- not the end -- of what I believe will be a sustained national focus on getting our fiscal house in order. We still have a very long way to go and a great deal of hard work to do. The American people are hurting. Unemployment remains at unacceptable levels and is estimated to continue to grow. We need to cut spending, spur economic growth and get people back to work. These goals cannot be achieved by raising taxes on individuals and small businesses. And they cannot be achieved by expanding the size of government and massively increasing federal spending. It's time we learned from the lessons of the past. And the past has taught us that we cannot spend and tax our way to prosperity -- America has been driven down that road -- and we nearly plunged off of a cliff into economic disaster. I believe that this measure will begin to put us on the right track.

I urge my colleagues to seize this opportunity to put America back on a path to fiscal solvency and vote in favor of this compromise.

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