Feb. 1 (Bloomberg) -- Congress voted to send legislation suspending the U.S. debt limit for three months to President Barack Obama, temporarily removing the risk of a government default from fiscal negotiations.
The measure, crafted by House Republicans, will lift the government’s $16.4 trillion borrowing limit until May 19. The Senate cleared it 64-34 yesterday, eight days after the Republican-led House passed the legislation.
“Raising the possibility that the United States could default on its obligations every few months is not an ideal way to run a government,” Senate Majority Leader Harry Reid said yesterday before the vote. “But a short-term solution is better than another imminent, manufactured crisis.”
The measure eliminates the risk of a default in the short term. Lawmakers fought for months over raising the ceiling in 2011. Obama signed the increase into law on Aug. 2, 2011, the day the Treasury Department warned that U.S. borrowing authority would expire.
West Virginia Senator Joe Manchin was the only Democrat to oppose the measure, which had the backing of 12 Republicans. Minority Leader Mitch McConnell, who is seeking a sixth term in Republican-leaning Kentucky next year, voted against the bill.
The debt-limit measure includes a prod to lawmakers, saying the House and the Senate each must adopt a budget for the next fiscal year by April 15. If not, pay for members of the chamber that doesn’t act will be withheld until they adopt one -- or until the end of the 113th Congress at the latest.
House Speaker John Boehner, an Ohio Republican, said in a statement following the vote that Senate Democrats should “present a plan that balances the budget and responsibly addresses the government’s spending problem.”
Reid, a Nevada Democrat, said the Senate plans to adopt a budget this year. He told reporters Jan. 29 the debt-limit increase will not “resort to hostage-taking tactics” that he said Republicans used in the past.
McConnell said the debate over the debt limit should prompt Democrats to consider spending cuts and revamping government programs as part of a budget blueprint instead of coming up with another increase in revenue.
“Hopefully this will be a serious exercise, and not simply an excuse for them to try to raise taxes -- which, as we know, is just another way to avoid solving core problems,” McConnell said in a statement Jan. 29.
McConnell voted against the measure yesterday because the Democratic-led Senate rejected several Republican amendments to cut spending, his spokesman John Ashbrook said in a statement. One such amendment, sponsored by Senator Rob Portman, an Ohio Republican, would have required any future debt-limit increase to be offset by equal spending cuts over the next decade.
The short-term bill continues the congressional trend of “governing from crisis to crisis; from cliff to cliff,” Senator Dan Coats, an Indiana Republican, said during floor debate as he called for spending cuts to reduce the deficit.
The debt limit has been raised periodically since its creation in 1917. Before yesterday’s vote, Congress increased or revised it 79 times, including 49 times under Republican presidents, since 1960.
Under the legislation, the nation’s borrowing authority will automatically rise on May 19 to accommodate the amount the U.S. Treasury borrowed during the period that the limit is suspended.
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 one basis point to 1.98 percent at 5 p.m. New York time, according to Bloomberg Bond Trader prices. It touched 2.03 percent Jan. 30, the highest since April 25.
Republicans plan to use two other deadlines to try to extract spending cuts from Obama and congressional Democrats. On March 1, $1.2 trillion in automatic spending cuts are scheduled to take effect, half from defense programs.
Congress also must enact legislation to finance the government by March 27, when the current stopgap funding measure is scheduled to expire.
House Budget Committee Chairman Paul Ryan of Wisconsin said 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 on Jan. 23.
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