|The eleventh hour deal came after weeks of political wrangling between Republicans and Democrats [GALLO/GETTY]
The US Senate has approved a bill that raises the country's borrowing limit and averts a possible default, after the lower house of congress approved it on Monday following weeks of political wrangling.
The upper house of congress passed the measure by 74 votes to 26. It required 60 votes to pass.
Barack Obama, the US president, signed the bill into law following Tuesday's vote.
The earlier passage of the bill by the Republican-controlled House came a day before the deadline to lift the debt ceiling, with agreement between Republicans and Democrats over the $2.1 trillion deficit-cutting plan reached over the weekend.
In remarks delivered immediately following the passage of the bill in the senate, Obama said that "both parties need to take responsibility for improving this economy".
The president emphasised the need for congress to work towards passing stalled trade bills that created more jobs. He also said that he wanted to see unemployment benefits extended.
Obama said that politicians need to continue to work towards finding a balanced approach to reducing the deficit, including some adjustments to healthcare benefit plans for the elderly and reforming the tax code so that the wealthy pay more.
"We can't balance the budget on the backs of the very people who have borne the biggest brunt of this recession," he said.
No immediate tax increases
The vote in the Senate had been virtually guaranteed to pass the bill, with Harry Reid, the Democratic majority leader, and Mitch McConnell, the Republican minority leader, both backing it.
It passed with support from 45 Democrats, 28 Republicans and an independent. Nineteen Republicans, six Democrats and an independent voted no.
The bill, which contains no immediate tax increases, raises the $14.3 trillion borrowing limit into 2013, calls for $900 billion in spending cuts spread over 10 years and creates a congressional committee to recommend a further $1.5 trillion in cuts by late November.
It does not spell out where the spending cuts should be made and instead puts off decisions about which programmes will bear the brunt.
Obama stressed that education and research would not be targeted by cuts, and that they would not happen "too abruptly, while the economy is still fragile".
World markets were initially down, despite the news, with the US Dow Jones Industrials bearish for the eight straight day on the back of spreading debt troubles in Europe and a decline in US consumer spending.
Al Jazeera's Patty Culhane, reporting from Washington DC, said that there was a lot of public anger over the way that the US congress went about dealing with this crisis.
"If you ask the American public across the board they blame anybody who currently holds elected office in Washington ... what is possibly going to impact the president here is what he's done to his base," she said.
"You'll hear from lawmakers here on Capitol Hill, especially the more on the far left [that] they feel as if the president simply walked up to the negotiating table and got nothing in return from the Republicans. They feel that he basically threw the Democrats here on Capitol Hill under the bus, is an expression I've heard a couple of times."
Credit rating fears
Reid, the US senate majority leader, said that while the deal left many people dissatisfied, it was necessary to avert a possible financial catastrophe.
"Today we made sure America can pay its bills. Now it's time to make sure all Americans can pay theirs," said Reid, as Democrats prepare to shift their attention towards lobbying for more US job creation and fighting unemployment, which remains above 9 per cent.
On Tuesday, Timothy Geithner, the US treasury secretary, said that it was unclear if the passage of the debt ceiling deal would ensure that the country did not lose its prized AAA rating from international credit ratings agencies.
The Fitch ratings agency retained its AAA rating for the US immediately following the passage of the bill, but more prominent firms Moody's and Standard & Poor's were yet to report.
The deal falls short of the $4 trillion in fiscal consolidation that rating agencies had indicated would be sufficient to retain the current rating.
Fitch said that the deal was an important first step, but "not the end of the process". The agency will be concluding its review of the US sovereign rating by the end of August, and it said that if matters remain as they stand, it could still downgrade the US debt at that time.
Any downgrade could lead to a spike in US interest rates, which would make debt payments costlier and hurt Americans holding flexible rate loans.
Christine Lagarde, the chief of the International Monetary Fund, meanwhile, welcomed the move from the US, but said that the country's finances needed to be placed on a more "sustainable" path.
"We welcome the agreement to raise the US government's borrowing limit and cut the budget deficit. By reducing a major uncertainty in the markets and bolstering US fiscal credibility, this agreement is good for both the US and the global economy," Lagarde said in a statement.
Source: Al Jazeera and agencies