Senate Increases National Deficit By $290B

Senate Lifts Debt Ceiling By $290B


A $290 billion increase in the Federal debt ceiling narrowly cleared Congress on Thursday, giving Treasury just enough leeway to pay the government’s bills into February and setting the stage for a showdown over fiscal policy early next year.

Senate Republicans insisted that 60 votes be required for passage and then held back their own members in order to force as many Democrats as possible to walk the plank on what has never been a popular or easily explained decision back home.

The same issue returns with a vengeance Jan. 20th when senators will be asked to vote on a still larger, long-term debt increase within days of President Barack Obama’s new budget and State of the Union address.

Treasury’s daily statements this week indicate it is still about $65 billion under its current $12.1 trillion ceiling, and conservatives argued that special measures could be invoked still to avert default over New Year’s. But with Congress leaving for the holidays, Senate Banking Committee Chairman Chris Dodd (D-Conn.) said that failure to act would have been “catastrophic” for the U.S. internationally. And Senate Finance Committee Chairman Max Baucus (D-Mont.) said that payments to Social Security recipients were also at risk.

“The bottom line is we have no choice,” Baucus told his colleagues. “We have to approve it.”

Between now and the January votes, there will be renewed efforts to try to reach some compromise on a bipartisan deficit reduction commission championed by the leadership of the Senate Budget Committee and more than a third of the full Senate. Without these votes, Treasury has no chance of prevailing, and the White House is already promising to take a more aggressive stance on deficits in its 2011 budget, due about Feb. 1.

But with the economy still fragile, Obama can’t afford to ignore the political threat of high unemployment and demands in his party for greater efforts to spur job creation. And for a man who campaigned on the promise of going through the budget page-by-page, the president has been remarkably silent on the new spending — and billions of dollars in parochial projects — included in annual appropriations bills approved this month.

In recent days, Obama has signed measures totaling more than $1 trillion with scarcely a comment. And going into House-Senate negotiations on health reform, he faces a major task now in convincing the public that the bill’s often tenuous financing schemes will actually hold up and not make the debt worse.

The bitter residue of that historic health care debate hung over the proceedings in the Senate on Thursday. And amid all the Christmas Eve hugs on the Senate floor, the debt ceiling vote was a moment of old-fashioned revenge for what many top Republicans view as a political betrayal last November after they joined in a bipartisan vote supporting the financial industry rescue plan championed by the Bush administration’s own Treasury Department.

The Democratic Senate campaign apparatus — overseen by Sen. Chuck Schumer (D-N.Y.), a strong ally of Wall Street — later ran highly effective ads attacking Republicans for supporting big bankers. And Minority Leader Mitch McConnell (R-Ky.) has never forgiven Democrats for those tactics and worked hard to hold back his colleagues.

“Mitch is hard over on this,” said one Republican, and the sole concession on the 60-39 roll call was among Midwest neighbors: retiring Sen. George Voinovich (R-Ohio) voted “yes” allowing Sen. Evan Bayh (D-Ind.), up for reelection next year, to vote “no.”

Sen. Judd Gregg (R-N.H.) had been a second Republican vote Democrats had hoped for — and one that might have been there if a real crisis arose.

As the ranking Republican on the Senate Budget Committee, Gregg had played a lead part in negotiating a deal with Senate Majority Leader Harry Reid (D-Nev.) this week guaranteeing him a chance to amend the next debt ceiling increase next month with legislation setting up a bipartisan deficit reduction task force or commission.

The 18-member group would be charged with making recommendations by the end of 2010, which would be voted on in the next Congress in 2011. Gregg is insistent that there be a statutory requirement that the House and Senate consider the commission’s findings under expedited proceedings, without amendment.

In return for getting a sure vote on his proposal, he had argued in Republican circles for more bipartisan support Thursday for the short-term debt ceiling adjustment. But ultimately he voted no in apparent deference to McConnell’s strategy.

“We’ll be back in January to consider yet another increase in the credit limit that probably will only allow us to borrow through the middle of next year if we’re lucky,” Gregg said in a statement later. “While it is critical to protect the government’s ability to meet its financial obligations, Congress should not consider passing a long-term debt limit increase unless the legislation also includes enforceable and meaningful measures to curb out-of-control government borrowing and spending.”

In explaining his vote for the debt increase, Voinovich also alluded to the January debate and the promise by Reid for a vote then on the Gregg commission, also backed by Senate Budget Committee Chairman Kent Conrad (D-N.D.)

“As one who knows all too well about our debt crisis, unbalanced budgets and unfunded liabilities — and one who is keenly aware of how closely the United States is being watched by the international community — I felt conscience-bound to vote for this short-term debt extension,” the Ohio Republican said. “For too long, I have felt alone in the desert in my calls for reform. ... I am … I am truly grateful for the leadership of Sens. Conrad and Gregg and was happy to help move this issue forward.

To hammer home the point further, Conrad released a letter immediately after the debt vote, urging Obama to come off the fence and back the commission. Signed by more than 30 senators, the letter takes note that the president has signaled he intends to make “deficit and debt reduction a center piece” of his State of the Union address.

“To accomplish these goals, we believe it is necessary to put in place a process that is bipartisan, accountable, comprehensive and which assures a vote on recommendations before the end of this Congress. Your support for and involvement in such a process is crucial for it to be a success.”


Sources: Politico