U.S. President Barack Obama has signed a bill that raises taxes on wealthier Americans and preserves tax breaks for the middle class, while delaying billions of dollars in mandated spending cuts.
The president signed the measure late Wednesday, a day after members of Congress passed the compromise legislation to avert the so-called "fiscal cliff."
Obama said late Tuesday, after the bill cleared Congress, that it was "one step" in a broader effort to strengthen the American economy.
What's Next After the Fiscal Cliff Deal
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Late February: Extraordinary measures to extend the nation's borrowing limit will be exhausted.
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March 1: Large automatic spending cuts, or sequestration, would take effect without congressional action.
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March 27: A temporary funding measure expires. Government agencies will run out of money unless Congress adopts a new bill.
"Today's agreement enshrines, I think, a principle into law that will remain in place as long as I am president: The deficit needs to be reduced in a way that's balanced. Everyone pays their fair share. Everyone does their part," he said. "That's how our economy works best. That's how we grow."
The International Monetary Fund says the plan did not go far enough to address the country's long-term economic problems, including its deficit and overall debt.
In a statement Wednesday afternoon, IMF spokesman Gerry Rice said more remains to be done to put U.S. public finances back on a sustainable path without harming what it said was the still fragile recovery.
President Obama and congressional Republicans have sparred for more than a year over tax rates, the extent of government spending, chronic budget deficits and the country's mounting debt.
Congressional leaders described Tuesday's deal as imperfect, but in the best interest of the American people.
Under the plan, taxes will increase for individuals making more than $400,000 a year and couples earning more than $450,000, the first U.S. income tax increase in 20 years. The package will also extend unemployment benefits for a year and boost taxes on large inheritances.
The compromise delays mandated cuts to defense spending and domestic programs for two months, setting up a future battle between the parties. Analysts have said that without a compromise, the $500 billion in austerity measures could eventually plunge the U.S. economy into another recession.
Even as U.S. leaders wrangled over the tax and spending issues, they soon face a decision on whether to increase the country's borrowing limit, which hit its current $16.4 trillion cap on Monday. Officials say the country will be able to pay its bills for another two months, but by then will need to increase the debt ceiling, an action likely to spark another extended debate over Washington's spending priorities.
President Obama said Tuesday he will not engage Congress in a debate about whether they should raise the debt ceiling to pay for the cost of the legislation they have already passed.
"We can't not pay bills that we've already incurred," he said. "If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic, far worse than the impact of the fiscal cliff."
Obama said he hopes lawmakers can work to solve the budget issues with "less drama" and "less brinksmanship" after a deal that required days of intense deadline negotiations.