Congress gave final approval Thursday to a plan to temporarily suspend the legal limit on the national debt, permitting the Treasury Department to keep borrowing and lifting the threat of a government default until August.
The measure, approved by the Senate 64 to 34, now goes to the White House for President Obama’s signature. Without congressional action, the administration had been warning that the Treasury would run out of money to pay the nation’s bills by early March.
The House passed the bill last week, days after Republican leaders announced that they would not try to use the moment as leverage in their battle with Obama over the federal budget. But House leaders said that they would not vote to raise the $16.4 trillion debt limit — a politically dicey move for which they have in the past demanded deep spending cuts.
Instead, they offered a novel plan to suspend enforcement of the limit through May 18. Under the measure, the Treasury Department can simply ignore the debt ceiling and keep borrowing to cover the cost of federal obligations.
On May 19, the debt limit will kick back in and automatically reset at a higher level. Treasury officials can then begin taking what they call “extraordinary measures” to continue paying the nation’s bills.
Analysts at the Bipartisan Policy Center predict that the Treasury will run up about $450 billion in additional debt through mid-May and that the date of a potential default will be postponed until August — “with a realistic chance of coming even later.” In recent days, administration officials have advised lawmakers that the center’s analysis matches Treasury calculations.
The measure also requires lawmakers in each chamber to adopt a budget blueprint by April 15 or have their paychecks withheld and placed in escrow until this session of Congress ends in 2015. The Senate has not approved a budget plan since 2009, when Democrats controlled both chambers.
While a large majority of House Republicans voted for the measure, most Senate Republicans voted no — along with one Democrat, Sen. Joe Manchin III (W.Va.).
Minority Leader Mitch McConnell (R-Ky.) also voted against the bill after the Senate rejected four GOP amendments, including two that would have forced additional spending cuts.
“As a result, the [minority] leader simply couldn’t support the bill,” McConnell spokesman John Ashbrook said.
Majority Leader Harry M. Reid (D-Nev.) said the bill “sets an important precedent — that the full faith and credit of the United States will no longer be used as a pawn to extract painful cuts to Medicare, Social Security or other initiatives that benefit the middle class.”
It remains to be seen whether that’s true. Even as the White House and congressional leaders begin crafting spending plans for the fiscal year that begins in October, they face new fiscal deadlines next month.
On March 1, deep, automatic spending cuts are set to hit the Pentagon and other federal agencies, potentially damaging the nation’s economy. And on March 27, lawmakers face the threat of a government shutdown when a broad funding bill expires.
And sometime this summer, the debt ceiling will once again need to be raised. This week, Senate Finance Committee chairman Max Baucus (D-Mont.) met with lawmakers in both parties to discuss a possible path forward: a negotiated debt-limit increase that would be paired with fast-track procedures for overhauling the tax code, as well as health and retirement programs.
That idea appeals to many Senate Republicans. Sen. Patrick J. Toomey (Pa.), a Finance Committee member, called it “certainly a possibility.”
But, Toomey said, “On our side, we have very broad agreement that we’re not interested in more revenue. We’re done with that. The other side does not share that view. And so, it’s not obvious how all this gets resolved.”