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Suspension of US debt limit wins congressional approval

Obama speaks at Del Sol High School in Las Vegas, January 29, 2013. — Reuters picObama speaks at Del Sol High School in Las Vegas, January 29, 2013. — Reuters picWASHINGTON, Feb 1 — A bill allowing the US government to keep borrowing money for at least a few more months, beyond its record US$16.4 trillion (RM49.2 trillion) debt limit, won final congressional approval yesterday, clearing the way for President Barack Obama to sign it into law.

The Democratic-led Senate passed the bill, 64-34, a week after the Republican-controlled House of Representatives approved it, 285-144. Both votes were bipartisan.

The legislation would put off until at least May 19 a showdown over the debt limit between Republicans, who demand more spending cuts to shrink deficits, and Democrats, who favor reducing deficits with a mix of spending cuts and tax hikes.

Senate Minority Leader Mitch McConnell joined 32 fellow Republicans and one Democrat, Joe Manchin of West Virginia, in voting no. Twelve Republicans, 50 Democrats and two independents voted yes.

McConnell opposed the bill because it did not contain spending cuts, spokesman John Ashbrook said. “What’s needed now is a long-term solution to Washington’s out-of-control spending and debt,” Ashbrook said.

Senate Democratic leader Harry Reid said passage of the bill shows Washington will not engage “in another irresponsible debate about whether the United States government should pay its bills.”

Drafted by House Republican leaders, the bill marks a major retreat from their vow to use the debt limit to extract more spending cuts. A fight over the debt limit in August 2011 led to a downgrade in the US government’s credit rating and sent markets tumbling.

By suspending enforcement of the debt limit, expected to be reached as early as mid-February, the government would keep borrowing money and paying its bills until at least May 19, when the limit would again be enforced.

Under the bill, the debt limit would have to be reset on May 19 to whatever level the debt reaches by then, likely about US$17 trillion.

The president has refused to negotiate on the debt limit.

Several other budget skirmishes are likely over the next five weeks. Congress must consider what to do about automatic budget cuts set for the beginning of March and a measure to continue funding the operations of the government that must be in place by March 27.

In the past two years, House Republicans have drawn the wrath of many voters and financial markets for pushing the government to the brink of a shutdown and an unprecedented default.

Many Republicans have said they want to avoid either scenario this year. But they are also demanding more spending cuts and insist they will not go along with tax hikes.

Republicans have pushed for changes in major entitlement programs, like the Medicare health program for the elderly and the Social Security retirement program, to extract savings.

Obama promised to protect both programmes, but has voiced a willingness to make some changes.

The debt-limit bill requires both the House and Senate to pass a budget by April 15. The Senate has not approved one in nearly four years, drawing complaints from Republicans that this has made it more difficult to find common ground on possible spending cuts.

The bill states that if either chamber fails to pass a bill by the April deadline, its members will not be paid. Republicans named the measure, “No Budget, No Pay Act of 2013.”

House Speaker John Boehner, the top US Republican, issued a statement shortly after the Senate vote, urging the chamber to approve a budget.

“Our shared goal should be to help grow the economy and expand opportunity,” Boehner said. “To do that, we need to budget responsibly.”

Senate Budget Committee Chairwoman Patty Murray of Washington has promised to produce a budget that reflects Democratic values, putting jobs, growth and the middle class first.

Murray said this would contrast with recent Republican budget plans that would gut investments in jobs and education, cut taxes for the wealthy and “end Medicare as we know it.”

May 19 is not necessarily a deadline to avoid default. The Treasury would be able to redeploy its emergency cash management measures, likely pushing a final day of reckoning into July.

The government is on track to amass a deficit exceeding US$1 trillion for its fifth straight fiscal year. That trajectory, if left unabated, would likely lead to a US credit rating downgrade. — Reuters

 

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