Obama signs debt-limit bill into law

Obama has finally signed the controversial debt ceiling bill into a law today. This plan has raised the federal debt limit and reduced government spending. The passing of this bill finally ended the stalemate that has been occurring in Congress for weeks and causing large amounts of uncertainty.

By Paul Kane, Lori Montgomery and William Branigin
Tuesday, August 2, 2:35 PM

The Senate passed a landmark plan to raise the federal debt limit and reduce government spending Tuesday, ending a partisan stalemate that threatened to plunge the nation into default and destabilize the world economy.

The measure was approved by a vote of 74 to 26. It promptly went to President Obama, who signed it into law, giving the government the money to pay its bills ahead of a midnight deadline.

Speaking in the White House Rose Garden after the Senate vote, Obama called the legislation “an important first step” in ensuring that the nation lives within its means, and he said it avoids “cutting too abruptly while the economy is still fragile.” He vowed to keep working for a “balanced approach” to deficit reduction that includes “reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share.”

The Senate vote came a day after the House voted 269 to 161 to pass the plan, as recalcitrant Republicans and disappointed Democrats rallied around calls to avert the nation’s first default and rein in ballooning deficits. The measure immediately grants the Treasury $400 billion in additional borrowing authority, with more to follow.

Obama urged Congress to take “bipartisan, common-sense steps” after its August recess to boost job creation and spur economic growth, including extension of tax cuts for middle-class families. He also called for patent reform, congressional passage of trade deals with Asian and Latin American countries and the creation of an “infrastructure bank” to put construction workers and projects together.

“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” Obama said in appealing for measure to raise more revenue from the wealthy and corporations. “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.”

In the Senate, 28 Republicans joined 45 Democrats and one independent in voting for the bill. Nineteen Republicans, six Democrats and one independent voted against it. Those opposed included some of the most conservative senators and some of the most liberal.

In debate before the Senate vote, there was little enthusiasm for the bill — just a recognition that it had to be passed.

Senate Minority Leader Mitch McConnell (R-Ky.) told tea party-allied conservatives that “although you may not see it this way, you’ve actually won this debate.” He said the bill “represents a new way of doing business in Washington,” adding: “We have changed the debate. We’re headed in the right direction.”

Senate Majority Leader Harry M. Reid (D-Nev.) said in a floor speech, “Our country was literally on the verge of a disaster,” which he said has now been averted. But he took issue with McConnell’s boast of tea party victory. “The result of the tea party direction of this Congress . . . has been very, very disconcerting and very unfair to the American people,” he said. Because the bill does not raise new revenue, Reid said, most Americans, including Republicans, “think the arrangement we’ve just done is unfair, because the richest of the rich have contributed nothing to this.”

The immediate achievement of the legislation is that it “clearly avoids default,” Sen. Bill Nelson (D-Fla.) said in a floor speech. But he said it could eventually usher in “major tax reform” by forcing lawmakers to overhaul the tax code, which he said is filled with loopholes, tax breaks and special-interest preferences that will cost $14 trillion over the next 10 years.

In arguing against the plan, Sen. Orrin G. Hatch (R-Utah), the top Republican on the Senate Finance Committee, said it falls well short of the “cut, cap and balance” approach that House Republicans advanced but that was shelved in the Senate. He defended existing “tax expenditures” — as spending through the tax code is known — saying they provide “an opportunity for individuals and businesses to keep more of the money that they earn.” He cited the home interest mortgage deduction, which he said mainly benefits taxpayers who earn less than $200,000 a year.

“Seen in isolation . . . this is not a good bill,” said Sen. Carl M. Levin (D-Mich.). Yet, he added, “despite its many flaws, this legislation must pass.” He complained that by failing to increase revenue by ending tax cuts and loopholes for the wealthy while slashing domestic spending, “this legislation incorporates some policies that are profoundly unfair to middle-income Americans.”

Levin called on Obama to “lead the nation to accept the notion that everyone, including the wealthy, must play a role in reducing deficits.”

Unlike the scene in the House five days earlier, when Republican leaders were working furiously to round up votes in favor of Speaker John Boehner’s (R-Ohio) debt-limit proposal, both parties’ leadership teams in the Senate appeared to be relaxed.

After Tuesday’s vote, Reid and McConnell met in the center aisle of the chamber and shook hands, exchanging several words before going their separate ways.

At a news conference shortly after the vote – just as Obama was addressing reporters at the White House -- Senate Democratic leaders emphasized to a crowd of reporters that they were determined to return to their message about job creation.

On Monday, Boehner persuaded more than two-thirds of his caucus to support the bill by assuring the lawmakers that few GOP priorities were in the line of fire and that Obama had retreated on his demand for higher taxes.

Angry Democrats largely shared that assessment. But after withholding their votes for most of the roll call, they split evenly for and against the proposal, which would cut at least $2.1 trillion from projected borrowing over the next decade without any immediate provision for new taxes.

A grueling battle that had consumed Congress for most of the spring and the summer ended with a large round of bipartisan applause shortly after 7 p.m. Monday, when the legislation secured a majority.

The lawmakers were brought to their feet again by the stunning appearance of Rep. Gabrielle Giffords (D-Ariz.), who cast her first vote — in favor of the debt deal — since she was shot in the head in early January in Tucson. The shooting prompted several weeks of soul searching on Capitol Hill about the hostile partisan rhetoric that often fills congressional debates and campaigns, a brief respite that soon passed as Congress dove into six straight months of warfare over federal budgets.

The debt plan prompted grumbling from some GOP defense hawks about proposed cuts to next year’s Pentagon budget. But Monday’s final hours were more notable for the cries from House liberals, who charged that the measure gave them little to support. Aside from potential military cuts, Democrats said the agreement calls on Republicans to sacrifice very few priorities, while asking Democrats to accept steep reductions in programs that benefit the middle class.

“It’s time for America to deal with its spending problem, and deal with the fact that we’ve made promises to the American people that our kids and grandkids just can’t afford,” Boehner said at a valedictory news conference 3 1 / 2 hours before he gaveled the vote to a close.

Just four days after Boehner suffered a humiliating defeat when he could not pass similar legislation solely on GOP votes, the speaker still saw 66 defections from his side of the aisle.

The agreement was sealed late Sunday after weeks of acrimonious debate. It will raise the $14.3 trillion debt limit by at least $2.1 trillion, including the immediate $400 billion released upon Obama’s signature. An additional $500 billion will come in the fall, unless two-thirds of both chambers of Congress vote to prevent it. The final increase, which will occur early next year, provides the Treasury with sufficient borrowing power to pay the bills into early 2013.

The deal also calls for sharp cuts in agency spending — about $917 billion over the next decade, according to congressional budget analysts, starting with a $25 billion reduction in the fiscal year that will begin in October. The agreement on agency spending next year makes it far less likely that a funding dispute will shut down the government before the 2012 presidential election.

Democrats took comfort in the fact that the cuts were less severe than House Republicans approved in their budget blueprint in April. Compared with the GOP budget, the agreement provides about $44 billion more for domestic programs, including Pell grants for college — and $10 billion less for defense.

Those security cuts created a last-minute issue for Boehner, whose closest allies include the top Republicans on committees that fund the military. But at an emotional Monday morning meeting of Republicans, several longtime GOP lawmakers spoke in support of the plan, aides said.

A second stage of reductions would come later this year, with the appointment of a special committee charged with wringing at least $1.2 trillion more out of the budget over the next decade. If the committee failed to act — or if Congress did not adopt its recommendations — government spending would be cut across the board by the same amount, with the reductions split 50-50 between domestic programs and defense.

House Minority Leader Nancy Pelosi (D-Calif.) emphasized that the “trigger” would exempt programs for the poor, including Medicaid, Social Security, food stamps, and health and nutrition programs for children.

One of the big victories by tea-party Republicans in the debt-ceiling measure was securing a requirement that Congress vote later this year on a balanced budget amendment to the Constitution.

The measure would need a two-thirds vote in each chamber, and then ratification by 38 states, to succeed. And most observers believe passage in the Democratic-controlled Senate is all but impossible.

But Sen. Mark Udall, the centrist Democrat from Colorado, has introduced an amendment proposal and said Tuesday that Democratic leaders have chosen his legislation to be considered in the fall.

Obama and other senior Democrats have opposed any balanced-budget amendment, but the idea is popular with many voters – particularly independents, who are growing more fiscally conservative.

Udall is up for reelection in 2014. Many of his Democratic co-sponsors – including Sens. Claire McCaskill (Mo.), Joe Manchin (W. Va.), Bill Nelson (Fla.) and Ben Nelson (Neb.) – are running this year and need support from centrists.

Republicans in the Senate will likely rally around their own proposal, sponsored by Utah Sens. Orrin Hatch and Mike Lee, which would limit spending to 18 percent of GDP and require congressional supermajorities to raise taxes.

But Udall’s amendment has a couple of provisions that might win over some Democrats. It creates a “Social Security lockbox” that his office says would “protects the revenue and outlays of Social Security from any balanced budget requirement.” And it prohibits Congress from providing income tax breaks for people earning over $1 million a year unless the country is enjoying budget surpluses.

Polling director Jon Cohen and staff writers Felicia Sonmez and Peter Wallsten contributed to this report.

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