US House of Representatives passes plan to extend borrowing

Wednesday 23 January 2013 22.43
House Speaker John Boehner said Republicans want reforms
House Speaker John Boehner said Republicans want reforms

The US House of Representatives has passed a Republican plan to allow the federal government to keep borrowing money until May.

The way seems clear for fast enactment, after both the top Senate Democrat and the White House endorsed it.

The 285-144 vote in the Republican-controlled House drew the opposition of 111 Democrats.

Many labelled it a negotiating gimmick that would set up a new "fiscal cliff" weeks after the White House and Congress reached a deal to avert a package of automatic spending cuts and tax hikes.

The 33 Republicans who voted against the bill were largely dissatisfied with the lack of spending cuts.

The plan avoids for the time being a repeat of the 2011 debt ceiling standoff that rattled markets and prompted a downgrade of the government's triple-A credit rating.

The US Treasury is expected to exhaust remaining borrowing capacity under the $16.4 trillion debt limit between mid-February and early March.

The House vote marked a sharp departure from Republican vows to use the debt ceiling issue as a way to extract spending cuts from President Barack Obama.

But House Speaker John Boehner warned immediately after today's vote that Republicans would take the next opportunity - automatic budget cuts set for 1 March - to demand "reforms" from Mr Obama.

The automatic cuts, which were temporarily delayed earlier this month in a fiscal deal between the White House and Congress, are "going to go into effect" unless Mr Obama makes concessions, Mr Boehner said.

The bill aims to draw Senate Democrats into the debate by requiring both chambers to pass a formal budget resolution by 15 April.

If either the House or Senate fails to meet this deadline, lawmakers' pay is suspended until they pass a budget.

Republicans have named the bill the "No Budget, No Pay Act of 2013."

The Senate has not passed a budget in nearly four years, causing the government to rely on stop-gap spending measures to fund its operations.

Senate Majority Leader Harry Reid said the Democratic-controlled Senate would take up the bill and pass it without changes.

He and other top Senate Democrats praised the Republican plan for not requiring spending cuts to match the increase in borrowing authority.

A Senate vote on the measure could come as early as next week.

Both Mr Reid and President Obama have called for a "clean" debt limit increase.

The White House said yesterday that Mr Obama would not stand in the way of the bill if it was passed by Congress.

Senate Budget Committee Chairwoman Patty Murray said she would produce a budget that reflected Democratic values, putting jobs, growth and the middle class first.

This would contrast with recent Republican budget plans that would gut investments in jobs and education, cut taxes for the wealthy and "end Medicare as we know it", she said.

"We know that when our priorities are laid out next to Republicans' the public stands with us," Ms Murray said, adding that she was looking forward to sparring with her Republican counterpart, House Budget Committee Chairman Paul Ryan.

House Republicans backed the debt-limit extension in the face of polls showing Americans blaming them, rather than Democrats, for the uncertainty surrounding the so-called "fiscal cliff" that was resolved around New Year's Day by raising taxes on the wealthy.

The bill avoids an immediate threat of US default by suspending limits on the government's ability to borrow until 19 May.

It does not specify a dollar amount for debt ceiling increase, but allows borrowing as needed to meet federal obligations that must be paid by that date.

Congress would then have to agree on a new, longer-term debt ceiling increase around that time - a deal that would not likely come without a more comprehensive deficit reduction plan.

19 May is not a deadline for default. The Treasury would be able to redeploy its emergency cash management measures at that time, likely pushing a final day of reckoning into July.

Mr Boehner, who unveiled the debt limit extension plan last week, said he and fellow House Republicans were committed to passing a budget that would reach balance in ten years.

According to budget experts, achieving such a goal, especially in the absence of additional tax hikes, would require massive cuts in federal spending beyond any envisioned in previous Republican-backed budgets or in the deficit-reduction plans of panels such as the bi-partisan Bowles-Simpson commission on Fiscal Responsibility and Reform.

Even Mr Ryan's controversial budget plan last year did not envision reaching a surplus until about 2040, despite deep spending cuts.

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