Obama sent debt-limit suspension

— The Senate on Thursday sent President Barack Obama legislation suspending the government’s statutory borrowing limit until May, accepting a House Republican demand that Senate Democrats produce a budget plan this spring in exchange for a debt-limit reprieve that included no spending cuts.

The 64-34 vote ended for now a showdown that had threatened the full faith and credit of the U.S. government. The Treasury Department has been shuffling federal accounts for a month to ensure that it could pay interest to its creditors even after the government officially breached its borrowing limit. By mid-February, the Obama administration warned, the Treasury would have exhausted such “extraordinary measures” and would have been forced to default for the first time.

The deal “sets an important precedent,” said Sen. Harry Reid, D-Nev., the majority leader, “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. A clean debt-ceiling increase that allows the United States to meet its existing obligations should be the standard.”

The legislation, written by House Republican leaders, passed the House last week 285-144, with most Republicans voting for it. In the Senate, most Republicans - and Sen. Joe Manchin, D-W.Va. - voted no.

Republican Sen. John Boozman of Arkansas voted no, but Democrat Mark Pryor voted for the legislation.

The next budget fight will come March 1, when across the-board military and domestic spending cuts totaling $1 trillion over 10 years would begin to go into force. House Republicans say they would entertain proposals to shift those cuts to other programs but will not back down on the spending reduction.

On March 27, the stopgap law financing the government will expire, raising the specter of a government shutdown. Then on May 18, the debt-ceiling issue will come back into force unless a broader deficit-reduction deal can be reached before then.

“We’re going to be back here in a few months with the same impasse,” said Sen. Pat Toomey, R-Pa.

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 after Thursday’s vote that Senate Democrats should “present a plan that balances the budget and responsibly addresses the government’s spending problem.”

Reid said the Senate plans to adopt a budget this year. He told reporters Tuesday that the debt-limit increase will not become entangled in the “hostage-taking tactics” that he said Republicans have used in the past.

The debt limit has been raised periodically since its creation in 1917. Congress increased or revised it 79 times, including 49 times under Republican presidents, since 1960.

The final vote on the debt-limit deal came only after Reid and Sen. Mitch McConnell of Kentucky, the Republican leader, reached agreement on an orchestrated path to passage. To get there, the Senate voted on several Republican amendments. One would have added spending cuts to the deal.One would have mandated that in the event of a debt ceiling impasse, the Treasury Department would wall off incoming tax receipts to pay interest on the federal debt, Social Security benefits and military pay for active-duty servicemen.

Democratic Sen. Max Baucus of Montana, chairman of the Finance Committee, compared that with The Hunger Games, saying it would pit all other federal programs against one another, just as the fictional games pitted children against children in a fight to the death.

“It’d be total chaos,” he said.

Sen. Rand Paul, R-Ky., was given a vote to stop the sale of F-16 fighter jets and Abrams tanks to Egypt, the most recent of a series of votes Paul has forced to cut off aid to Egypt in the wake of the rise of the Muslim Brotherhood.Senators of both parties said the amendment would cut off all military assistance and end U.S. leverage in Egypt.

Under the Reid-McConnell agreement, all of those amendments would have required 60 votes, and all failed to achieve that threshold. Pryor and Boozman split on each amendment, with the Democrat voting to cast all of them aside and the Republican siding with each one.

McConnell expressed Republican hopes that Thursday’s passage would begin tough but fruitful negotiations on the deficit that would include proposals to control the growth of entitlement programs such as Social Security and Medicare, which are being propelled by an aging population.

“The president and his allies have had four years to put their ideas into practice. Those policies have failed,” McConnell said. “It’s time for a new approach. And, if Democrats are ready to finally get serious - to end the blame game and pursue real pro-growth policies - then Republicans are here to show them the way forward.”

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.

The military’s top leaders, meanwhile, are warning Congress that the automatic spending cuts looming in March would force the Pentagon to reduce operating budgets, weakening the armed forces and possibly forcing furloughs of 800,000 civilian employees.

The Joint Chiefs said in a Jan. 14 letter to Congress that the cuts would create a “hollow force” and would require aircraft to be grounded and warships to return to port.

Information for this article was contributed by Jonathan Weisman and Annie Lowrey of The New York Times; by Roxana Tiron and Kathleen Hunter of Bloomberg News; and by Andrew Taylor of The Associated Press.

Front Section, Pages 1 on 02/01/2013

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