Senate to clear debt limit increase for Obama

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.