WASHINGTON // The US yesterday stepped back from the brink of financial disaster as a bitterly contested deal to raise the debt ceiling was passed by the US congress, enabling Barack Obama, the US president, to sign it into law before a midnight deadline.
Senators approved the deal by a comfortable 74-26 margin after the bill had also passed the House of Representatives late on Monday. A few minutes after the Senate vote, Mr Obama appeared before the cameras at the White House.
He said: "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 partisanship aside and find a compromise."
Mr Obama also took the opportunity to look ahead at the urgent issues facing the American economy and said that creating jobs and economic growth would not just be about cutting spending. Politicians, he said, need to find a "balanced approach" to budget negotiations.
"We can't balance the budget on the back of the very people who have borne the biggest brunt of this recession."
The bill will raise the US debt ceiling by US$900 billion over the next few months, accompanied by a similar amount in spending cuts to be spread over the next decade. That will be followed by another $1.5 trillion of savings early next year, pending agreement by a bi-partisan commission that will investigate further measures to cut the deficit, including spending cuts and revenue-raising measures.
A trigger mechanism of an automatic US$1.3 trillion increase in the debt ceiling accompanied by a package of spending cuts of a similar amount, primarily to defence, will kick in if the commission cannot come reach agreement later this year.
It was a bill that almost no one was happy with and, in a way, represented the lowest common denominator agreement possible. But, more fearful of a debt default, politicians from both sides eventually, if reluctantly, came aboard.
"I'm not happy with it," House minority leader, Nancy Pelosi, a Democrat from California, said late on Monday. "But I'm proud of some of the accomplishments in it. That's why I'm voting for it."
Similar reservations were expressed by Republicans. "It's about time that Congress came together and figured out a way to live within our means," said Sean Duffy, a Republican congressman from Wisconsin. "This bill is going to start that process, although it doesn't go far enough."
For its part, the White House on Monday said the agreement represented a "victory" for bipartisan compromise that "removes the cloud of uncertainty over our economy" and stays true to a commitment by Mr Obama to "shared sacrifice" by shielding the middle class and the poor from the burden of deficit reduction.
For Mr Obama, the bill will also come as a relief because it will see the government able to pay its bills through the beginning of 2013, and beyond the 2012 elections.
Those elections will now likely be fought in large part on the issues so fiercely debated over the past week's confrontation between a Tea Party-powered Republican Party and Mr Obama and the Democratic Party.
Significantly, of all the Republican presidential hopefuls, only one, Jon Huntsman, publicly supported the bill. The others, mindful of the growing importance of a right-wing base that wants to see government spending slashed and the deficit cut without any tax increases or other revenue-raising measures, opposed the bill on the grounds that the cuts were not deep enough in comparison to the increase in the debt ceiling.
Democrats have also been wary of a bill that in its initial stage includes only spending cuts. They worry this will lead only to more cuts affecting programmes for the poor, elderly and the middle class in social security, Medicare and Medicaid programmes.
Democrats argue that any spending cuts must be accompanied by measures to increase government revenue, largely through an end to tax loopholes for the rich as well as large corporations.
The deal has been greeted with relief on world markets, however, where US treasury bills rose for the fourth straight day yesterday. Some credit ratings agencies have suggested that in spite of the deal, the US may still lose its Triple-A rating. That has not prevented Pimco, the world's largest bond fund, from beginning to buy US treasuries again.
But while markets may again look to the US as a safe haven for investments, at least in the short term, Americans themselves have had an already low faith in the own politicians shaken to the core.
When respondents in a poll on Monday by The Washington Post and the Pew Research Centre were asked for a single word to describe the spectacle that just took place, two thirds volunteered "ridiculous". "Disgusting" and "stupid" were two other popular choices. Only two per cent had anything nice to say about the debt debacle.