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With debt debate over, Obama focuses on jobs

Associated Press | 8/3/2011, 1:51 a.m.

The bill raises the U.S. debt ceiling to $14.3 trillion to keep Uncle Sam in good standing with its creditors. However, it came at a cost for lawmakers who had to make tough choices about America’s financial priorities.

In the end, the two sides came up with legislation that will trim more than $2 trillion from the budget over the next decade, while raising the debt ceiling enough to keep the government funded into 2012. But it does not include any new taxes to raise revenues for the government.

For Obama, dealing with the debt ceiling will no longer be an immediate concern during the next presidential election, as the deal will allow the U.S. Treasury to borrow the money it needs to cover American obligations through 2012.

But debate will surely continue on how much America spends and the way it allocates it resources.

Even with an agreement in place on the debt ceiling, there are some economists who believe America’s reputation and credit standing will be downgraded in the near future.

Paul Dales of Capital Economics released a statement Tuesday indicating that the U.S. fiscal position still looks “perilous,” despite the legislation that was passed Tuesday.

If all the spending cuts go forward as prescribed in the pending legislation, Dales said America will have a national debt in 10 years’ time that is very high for its projected GDP.

“This explains why the U.S. is still likely to lose its AAA credit rating very soon,” Dales said in the statement.

“As such, more fiscal consolidation will be needed, which will act as a brake on economic growth for some years to come and result in the Federal Reserve keeping monetary policy loose for longer.”

Allan Lichtman, a U.S. presidential historian at American University, said the acrimonious fighting that accompanied the debt debate was an embarrassment for ordinary Americans.

“It was about as messy as it possibly could be and the American people are utterly disgusted,” Lichtman said.

Material from the Los Angeles Times, the Associated Press and other publications contributed to this report.