WASHINGTON (Reuters) - The Senate voted narrowly on Thursday to increase the government’s borrowing authority to $14.3 trillion, which would allow the Treasury Department to continue servicing the country’s spiraling national debt through most of 2010.
Senate Democrats hope the 60 to 40 party-line vote will enable them to avoid another politically toxic vote on the issue before the November congressional elections.
The House of Representatives will vote on the legislation next week, House Majority Leader Steny Hoyer said. It will then go to President Barack Obama and be signed into law.
Congress must periodically raise the legal limit for the government’s borrowing, and the Treasury Department is expected within weeks to exceed the current $12.4 trillion limit set in December.
Failure to raise the limit would roil financial markets, but lawmakers are never eager to sign off on a measure that allows the government to dig itself deeper into debt.
The national debt more than doubled over the past decade as Republican President George W. Bush cut taxes while pursuing wars in Iraq and Afghanistan and setting up an expensive prescription-drug benefit.
“We’ve gone to the restaurant, we’ve eaten the meal, and now the only question is whether we’ll pay the check,” said Democratic Senator Max Baucus.
President Barack Obama and his Democrats who control Congress now face a growing public backlash over the aggressive spending measures they have taken to stimulate the economy, which had been mired in the worst recession in 70 years.
The government spent a record $1.4 trillion more than it collected in the past fiscal year, and the nonpartisan Congressional Budget Office (CBO) forecasts a similar $1.35 trillion deficit for the current fiscal year, which ends September 30.
Experts warn that investors could demand higher interest rates on U.S. debt if Obama and Congress do not get the budget deficit under control. If current policies are not changed, the government’s interest payments will more than triple over the coming decade, CBO said.
Obama has proposed a three-year freeze on domestic spending starting in October, though it remains to be seen whether his colleagues in Congress support it.
Seeking to ease the pain of the debt-limit vote, Senate Democrats paired it with a budget-control measure that would require new spending to be offset with cuts elsewhere, an approach called ‘paygo’ used successfully in the 1990s to turn deficits into surpluses.
Republicans said that measure could be easily circumvented and none voted for it.
At a town hall event in Florida, Obama said he was “grateful” to the Senate for passing paygo.
A separate measure that would have set up a bipartisan commission to figure out a way to balance the budget failed in the Senate on Tuesday in the face of opposition from interest groups on the left and right who worried that it would lead to tax hikes or cuts to favored programs.
Obama plans to set up a similar commission by executive order, but it would have less legal authority and could have trouble drawing Republican cooperation.
Editing by Philip Barbara