Congress sends bill to Obama averting govt default

Associated Press
FILE - In this Tuesday, Jan. 1, 2013, file photo, the dome of the Capitol is reflected in a skylight of the Capitol Visitor's Center in Washington. The Senate Thursday, Jan. 31, 2013, 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. (AP Photo/Jacquelyn Martin, File)
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FILE - In this Tuesday, Jan. 1, 2013, file photo, the dome of the Capitol is reflected in a skylight of the Capitol Visitor's Center in Washington. The Senate Thursday, Jan. 31, 2013, 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. (AP Photo/Jacquelyn Martin, File)

WASHINGTON (AP) — Congress sent President Barack Obama drama-free legislation on Thursday raising the debt ceiling, averting a government default and putting off the next tax-and-spending clash between the White House and Republicans until later in the year.

The measure cleared the Senate on a vote of 64-34 after winning House approval late last week. It permits the Treasury to borrow above the current $16.4 trillion debt limit through May 18. The White House has said Obama will sign it.

"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," Sen. Max Baucus, D-Mont., said before the vote. "Every single American would feel the economic impact."

But Republican leader Mitch McConnell said in remarks on the Senate floor that "government spending is completely out of control - and it's projected to get much worse in years to come." His office issued a statement shortly after the vote saying he had opposed the legislation after Democrats torpedoed several GOP attempts to rein in spending before final passage.

The legislation reflects a switch in strategy by Republicans, whose insistence on deep spending cuts as a trade-off for a higher debt limit more than a year ago pushed the government to the brink of an unprecedented default. With polls showing their public support lagging, they now look ahead to a new season of potential showdowns, with a reshuffled batting order that moves the threat of a default to the back of a line that includes March 1 across-the-board spending cuts and the March 27 expiration of funding for most federal agencies.

The debt limit measure came with only one string attached by House Republicans, a provision that would temporarily withhold the pay of lawmakers in either house that failed to produce a budget this year.

That was designed as a prod to the Senate, where majority Democrats have failed to bring a budget to a vote in any of the past three years. This year, they say they will. Republicans say they are eager for a comparison of plans, rather than a long year spent defending one of their own.

Already, the next conflict over budget priorities is taking shape, in an environment includes a fresh report that the economy unexpectedly declined in the last quarter, and the emergence of a warning from the Pentagon's top uniformed officers that pending defense cuts could lead to a "hollow force."

Without changes, "we will have to ground aircraft, return ships to port, and stop driving combat vehicles in training," members of the Joint Chiefs of Staff wrote congressional leaders in a letter dated Jan. 14.

Obama and Democrats say they are prepared for further deficit reduction compromise, although they stress they want increased tax revenue as part of any deal.

Republicans want spending cuts only, after reluctantly swallowing $600 billion in higher taxes as part of a "fiscal cliff" compromise late last year.

To further their goals, House Republicans intend to produce a budget that balances in a decade, and are expected to vote as early as next week to demand Obama do the same.

Obama's budget is due to be made public later this month, although there is no expectation it will eliminate red ink in the next 10 years. Nor are majority Democrats in the Senate expected to do so either.

In the meantime, though, they are likely to propose legislation in the next few weeks to replace the looming across-the-board cuts with a series of targeted reductions and higher taxes.

In all, 50 Democrats, 12 Republicans and two independents voted in favor of the debt limit bill, while 33 Republicans and Democratic Sen. Joe Manchin of West Virginia opposed it.

In the run-up to the final vote, a proposal by Republican Sen. Rob Portman of Ohio to require dollar-for-dollar spending cuts on any future debt limit increases was cast aside, 54-44.

"America must pay its bills — no one is arguing against that point," Portman said in a statement issued after the bill's passage. "What we are debating is how to shrink those bills moving forward so the federal government doesn't continue maxing out its credit card and selling out future generations."

Also blocked was an attempt by the Ohio Republican, who served as budget director under President George W. Bush, to guarantee that the government stay open — at reduced spending levels — even if funding expires in the future. The vote was 52-46.

Sen. Pat Toomey of Pennsylvania authored a proposal to give priority to payment of principal and interest on the debt, Social Security benefits and military pay in the event the debt limit is reached in the future. It failed on a wider, bipartisan vote of 79-19.

Treasury Department officials said that as soon as Obama signs the debt limit legislation, Treasury will begin taking steps to reverse the measures it has been taking over the past month to avoid exceeding the current debt limit, which was reached on Dec. 31.

Treasury has the ability to create about $200 billion in headroom primarily by tapping funds from government employee pension funds. Treasury said it will restore the money that was diverted with interest once the debt legislation is signed. That will allow the same measures to be used once again if needed when the current debt authority runs out on May 18.

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AP Economics Writer Martin Crutsinger contributed to this report.

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