WASHINGTON - With scant time to spare, President Barack Obamasigned legislation Tuesday to avoid an unprecedented nationaldefault that he said would have devastated the U.S. economy. But thetruce with Republicans that defused the crisis seemed to be fadingalready.
Wall Street crumpled, dismayed by reports of new economicweakness and unimpressed by Congress' prescription. The Dow Jonesindustrial average sank by 266 points, its eighth straight losingsession, and biggest.
The compromise deal to persuade GOP lawmakers to raise thefederal debt limit will cut federal spending by $2.1 trillion ormore over the next decade. But Obama immediately challengedRepublicans to accept higher taxes on the wealthy in a second roundof deficit cuts this fall. They adamantly refused to accept thatidea during the past months' dispute.
A stern-faced Obama said at the White House that action to raisethe debt limit had been essential but more - and different - stepswere badly needed.
"We've got to do everything in our power to grow this economy andput America back to work," the president said, arguing forcefullyfor including revenue increases as well as spending cuts in the nextround of efforts to trim huge government deficits.
It was the same call the GOP successfully resisted in the billjust approved, and there was little evidence of a change inposition.
"The American people agreed with us on the nature of the problem.They know the government didn't accumulate $14.3 trillion in debtbecause it didn't tax enough," said the party's leader in theSenate, Mitch McConnell of Kentucky.
Obama placed his signature on the bill in the privacy of the OvalOffice less than two hours after a bipartisan 74-26 vote in theSenate. The House approved the measure Monday night on a 269-161roll call that also reached across party lines and was sealed by arap of the gavel by Speaker John Boehner.
The bill allows a quick $900 billion increase in borrowingauthority as well as a first installment on spending cuts amountingto $917 billion over a decade.
Without legislation in place by day's end, the Treasury wouldhave been unable to pay all the nation's bills, leading to apotential default for the first time in history. Administrationofficials warned of disastrous consequences for an economy thatshows fresh signs of weakness on a near-daily basis as it strugglesto recover from the worst recession in decades.
The White House and congressional leaders said legislation wasimportant to reassure investors at home as well as overseas, andalso to preserving the nation's AAA credit rating. Talk of thatrating's precariousness continued nonetheless.
This week's peace pact between the two parties is unlikely to belong-lived.
The bill sets up a powerful 12-member committee of lawmakers withauthority to recommend fresh deficit savings from every corner ofthe federal budget.
Politically sensitive benefit programs such as Social Securityand Medicare will be on the table as the panel of six Republicansand six Democrats works against a Thanksgiving deadline. So, too, anoverhaul of the tax code. Congress will have until Christmas to voteon the recommendations without the ability to make changes.
As an incentive for Congress to act, failure to do so wouldtrigger $1.2 trillion in automatic spending cuts, affecting thePentagon as well as domestic programs.
Even before the president signed the legislation, he andRepublicans were maneuvering for political position on the nextstage.
"We can't balance the budget on the backs of people who haveborne the biggest brunt of this recession," the president said,renewing his call for higher taxes on the wealthy. "Everyone isgoing to have to chip in. It's only fair."
Senate Republicans say it will not happen.
"I'm comfortable we aren't going to raise taxes coming out ofthis joint committee," McConnell said in an interview with Fox onMonday.
In a speech shortly before the vote, he predicted instead arenewal of the most recent struggle over spending cuts.
The debt limit will have to be raised shortly after the 2012election, he said, predicting that no president of either party willbe "allowed to raise the debt ceiling without ... having to engagein the kind of debate we've just been through."
He conceded that Republicans got only part of what they wanted inthe deal, and he pointed to next year's elections with control ofthe White House and Congress at stake as a chance to gain greaterclout.
"Republicans only control one half of one third of the federalgovernment, but the American people agree with us," he said.
Senate Majority Leader Harry Reid, D-Nev., said the periodimmediately ahead "is going to be painful," particularly ifRepublicans insist they will not raise any taxes.
Numerous Democrats have complained about the concessions Obamaaccepted in the deal, and Reid and other Democrats soughtimmediately to change the subject.
"We now have the chance to pivot away from budget battles tojobs. We can reset the debate, and that's what we intend to do,"said Sen. Chuck Schumer, D-N.Y.
Obama spoke in less partisan terms at the White House.
"Both parties share power in Washington, and both parties need totake responsibility for improving this economy," he said.
THE ASSOCIATED PRESS President Barack Obama delivers a statementin the Rose Garden of the White House in Washington Tuesday beforesigning the debt ceiling agreement passed in the Senate.
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