WASHINGTON (AP) — The Senate Thursday took up must-do legislation to permit the government to borrow hundreds of billions
of dollars more to meet its obligations, putting off one Washington showdown even as others loom in coming weeks.
The measure would suspend the $16.4 trillion limit on federal borrowing through May 18, allowing about $450 billion in new
debt to be added to the federal ledger, according to an estimate by the Bipartisan Policy Center.
The Republican-controlled House passed the legislation last week. A successful Senate vote Thursday afternoon would send the
measure to President Barack Obama, who is expected to sign it into law immediately.
Without the bill, the government would default on its obligations by as early as mid-February.
"Failure to pass this bill will set off an
unpredictable financial panic that would plunge not only the United
States, but
much of the world, back into recession," said Sen. Max Baucus,
D-Mont. "Every single American would feel the economic impact."
The short-term increase in the borrowing cap
is the brainchild of House Republicans, who wanted to re-sequence a
series of
upcoming budget battles, taking the threat of a potentially
devastating government default off the table and instead setting
up a clash in March over automatic across-the-board spending cuts
set to strike the Pentagon and many domestic programs.
Those cuts — postponed by the recent "fiscal cliff" deal — are the punishment for the failure of a 2011 deficit supercommittee
to reach an agreement. The panel was itself established by the hard-fought 2011 increase in the debt limit.
Democrats are going along because the debt increase isn't contingent on matching cuts to the budget, as long demanded by House
Speaker John Boehner, R-Ohio.
Senate Republicans are offering several
amendments, including a proposal by Sen. Pat Toomey, R-Pa., to ensure
that in the
case of a cash crunch the government would use available tax
revenue to make sure that bondholders, Social Security and the
military get paid. Another, by Rob Portman of Ohio, sought to
require that any immediate increase in the debt limit be paired
with commensurate cuts to spending, which could be spread out over
10 years.
The GOP amendments, however, are sure to fail. Portman's amendment was killed by a 54-44 vote. Any successful effort to amend
the bill would require the House to vote again and delay delivery of the measure to the president.
To sell the measure to House GOP
conservatives, Boehner instead attached a "no budget, no pay" provision
that would withhold
pay for House and Senate members if the chamber in which they
serve fails to pass a budget plan. That was a slap at the
Democratic-controlled
Senate, which hasn't passed a budget blueprint since 2009.
The "no budget, no pay" provision is seen by
congressional insiders as a bad idea whose time has arrived. For
starters, it
makes members of the minority party dependent on the ability of
the majority party to advance a budget if they all are to
be paid. But the announcement of the move was quickly followed by
an announcement by Senate Democrats that they would indeed
advance a budget for the first time in four years.
Lawmakers have already shifted their focus
to the across-the-board cuts, which would pare $85 billion from this
year's budget
after being delayed from Jan. 1 until March 1 and reduced by $24
billion by the recently enacted tax bill. Defense hawks are
particularly upset, saying the Pentagon cuts would devastate
military readiness and cause havoc in defense contracting. The
cuts, called a "sequester" in Washington-speak, were never
intended to take effect but were instead aimed at driving the two
sides to a large budget bargain.
But Republicans and Obama now appear on a
collision course over how to replace the across-the-board cuts. Obama
and his Democratic
allies insist that additional revenues be part of the solution;
Republicans say further tax increases are off the table after
the 10-year, $600 billion-plus increase in taxes on wealthier
earners forced upon Republicans by Obama earlier this month.
The debt measure permits borrowing through May 18 and resets the debt limit to reflect it. But the deadline to again raise
the ceiling would be pushed off until August, according to Bipartisan Policy Center calculations. That's because Treasury
would retain the ability to use accounting steps known as "extraordinary measures" to stave off default.