The U.S. Senate has passed legislation that will prevent the government from going into an unprecedented financial default just hours before a midnight deadline.
The deal, agreed on a vote of 74-26, raises the U.S. debt ceiling, or the amount the government can borrow to meet its financial obligations.
Moments after the vote was finalized, President Barack Obama appeared before reporters at the White House to say that although the road to agreement had been marked by "a long and contentious debate," the deal would "avert a default that would have devastated [the U.S.] economy."
"This compromise guarantees more than $2 trillion in deficit reduction," Obama added. "It is an important first step to ensuring that as a nation we live within our means."
He is expected to sign the legislation immediately.
The vote on the bill in the Senate followed its passage August 1 in the House of Representatives, 269 to 161, and comes after weeks of some of the bitterest political fighting Congress has ever experienced.
The frequently hostile public debate between Republicans and Democrats hinged on how much public spending should be cut to begin paying down the country's debt and how much revenue should be raised through new taxes.
Democrats wanted higher taxes on the wealthiest Americans and no reductions in entitlement programs, like health care for the elderly, while Republicans opposed any new taxes and wanted deep cuts in all areas of federal spending.
The compromise bill that lawmakers ended up with lifts the current allowable borrowing limit of $14.3 trillion and requires some $2 trillion worth of budget cuts over the next 10 years.
Left To The Super-Committee
But it also postpones some of the hardest decisions until later because it establishes a "super-committee" of six Democratic and six Republican legislators who have until November to come up with an additional, serious public-spending cuts.
That proposal will then be put to a straight up-or-down vote in the House and Senate.
The legislation has critics on both sides -- conservative members of the Republican Party say it cuts too little and progressive members of the Democratic Party say it cuts too much.
Many lawmakers said they planned to vote for the bill only because it would keep the government out of financial default, which would have had serious consequences for the national and global economy.
Obama and Democratic members of Congress had pushed hard for the final bill to include more revenue-raising measures, including a tax increase on the wealthiest Americans. But Republicans held fast in their opposition to any tax hikes.
Today Obama called again for a "balanced approach" to be included in the bipartisan committee's November proposal.
"This compromise requires that both parties work together on a larger plan to cut the deficit, which is important for the long-term health of our economy," Obama said.
"And since you can't close the deficit with just spending cuts, we'll need a balanced approach where everything is on the table."
Default Averted, But Confidence Damaged
Without a signed bill on the books by midnight on August 2, the U.S. Treasury would have run out of cash needed to pay investors in Treasury bonds, recipients of Social Security pension checks, anyone receiving military veterans benefits, and businesses that do work for the government.
On August 1, Treasury Secretary Timothy Geithner told ABC News that he didn't know if the months of disagreement in Congress had damaged the country's AAA credit rating, but feared that "world confidence [in the United States] was damaged by this spectacle."
Polls show that the prolonged and bitter battle over spending and the debt ceiling has caused public confidence in Congress and Obama to drop.
It marks an unprecedented chapter in U.S. history, since in the past, presidents and several Congresses have lifted the borrowing limit routinely without controversy.
Written by Heather Maher, RFE/RL Washington Bureau