The U.S. House voted to temporarily suspend the nation’s borrowing limit, removing the debt ceiling for now as a tool for seeking deeper spending cuts.
The measure, passed 285-144, lifts the government’s $16.4 trillion borrowing limit until May 19. It goes to the Senate, where Majority Leader Harry Reid said lawmakers will pass the bill unchanged and send it to President Barack Obama.
“The premise here is pretty simple; it says that there should be no long-term increase in the debt limit until there’s a long-term plan to deal with the fiscal crisis that faces our country,” House Speaker John Boehner, an Ohio Republican, said during floor debate. “This is the first step in an effort to bring real fiscal responsibility to Washington.”
The revised strategy eliminates the risk that House Republicans would be blamed for a default in the short term. Republicans plan to focus on other fiscal deadlines and say they aren’t giving up their fight for cuts to federal programs.
Stocks rose, with the Standard & Poor’s 500 Index surging to its highest level since 2007. The S&P 500 gained 0.15 percent to 1,494.81 at 4:35 p.m. in New York. It rose 4.8 percent in January through today for the best start to a year since 1997. The Dow Jones Industrial Average rose 67.12 points, or 0.49 percent, to 13,779.33.
Republicans plan to use two other approaching deadlines -- the March 1 start of automatic spending cuts and the need to pass a bill by the end of March to fund the government -- to extract spending reductions from Obama and congressional Democrats.
The measure passed today, H.R. 325, would allow the nation’s borrowing authority to automatically rise May 19 to accommodate the amount the U.S. Treasury borrowed during the three months that the limit is suspended.
“The president believes that we need to, as a country, do the responsible thing and without drama or delay pay our bills,” White House press secretary Jay Carney said after the debt bill passed the House. “Ideally we would extend or raise the debt ceiling for a long period of time.”
Carney said the vote “represents a fundamental change” in the House Republicans’ strategy.
Reid said the Senate will act soon. “To spare the middle class another knock-down, drag-out fight, the Senate will proceed to and seek to pass the House bill,” he said in a statement. Second-ranking Democrat Richard Durbin of Illinois said the Senate probably won’t vote before next week.
House members voting for the bill included 199 Republicans and 86 Democrats, while 33 Republicans and 111 Democrats voted against it.
The House debt-ceiling plan is accompanied by a prod to lawmakers on the budget. It says the House and the Senate each must adopt a budget resolution for the next fiscal year by April 15. If not, the pay for members of the chamber that doesn’t act will be withheld and placed in an escrow account until they adopt one -- or, at the latest, until the end of the 113th Congress.
Reid said the Senate plans to pass a budget this year.
Boehner told reporters that if each chamber passes a budget, “now you’ve got competing visions” for federal spending.
“Out of those competing visions we’re going to find some common ground, I’m hopeful, that puts us on a path to balance the budget over the next 10 years,” Boehner said.
Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, said in an interview that to achieve that goal House Republicans will “try and balance the budget on the backs of seniors and kids” with cuts in Medicare benefits and aid to education.
The debt limit has been raised periodically since its creation in 1917, with Congress increasing or revising it 79 times, including 49 times under Republican presidents, since 1960.
Enactment of the legislation could allow the Treasury to continue borrowing for several months and delay the need for a longer-term increase in the debt ceiling until late summer.
Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, told Bloomberg BNA in an e-mail that “our very tentative estimates suggest” that the Treasury might not need another increase until August. Analysts at New York-based RBC Capital Markets LLC concurred, telling clients in a daily research note that “under this deal the drop-dead date might slide until August.”
The Treasury Department had said it expected to run out of emergency measures to prevent a breach of the current debt limit between mid-February and early March.
Investors in U.S. Treasury bonds, who most directly bear the risk of a government default, haven’t shown alarm. The 10-year yield fell two basis points, or 0.02 percentage point, to 1.83 percent at 4:59 p.m. in New York today, according to Bloomberg Bond Trader prices.
A debt-limit suspension would clear the way for House Republicans to focus on the debate to replace about $1.2 trillion in automatic spending cuts, half of which would come from defense. Congress delayed the start date of the automatic cuts to March 1.
Republicans are prepared to let the automatic cuts go forward even if Democrats don’t agree to restructure them to fall less heavily on defense, Representative Tom Cole, an Oklahoma Republican, said in an interview yesterday.
After dealing with the automatic cuts, the House plans to take up its budget resolution and then turn to a bill to fund the government through Sept. 30, according to Representative John Fleming, a Louisiana Republican. The government is being funded through a stopgap measure that expires March 27.
House Budget Committee Chairman Paul Ryan of Wisconsin said earlier today that Republicans want to force “a big down payment on the debt crisis” during the debate on spending cuts and extending the government’s borrowing authority.
“We have to set our expectations accordingly” and advocate Republicans’ goals “in a realistic way,” Ryan, the Republican vice presidential nominee last year, said at a breakfast sponsored by the Wall Street Journal.