Debt limit raised by $1.9 trillion

WASHINGTON -- The U.S. Senate voted last week to raise the limit on how much the government can borrow to keep itself running, a move that while necessary has become highly political.

Senators voted 60-39 to increase the ceiling on the nation's debt by $1.9 trillion, boosting the government's borrowing power to a total $14.3 trillion, the highest in history.

Speaking in favor of raising the debt limit, Sen. Max Baucus, D-Mont., said there was little choice: The money has been spent and now it must be repaid.

"The spending laws that created the debt are behind us," Baucus said. "The only question remaining is whether the government will honor its obligation to pay the bill. We have gone to the restaurant, we have eaten the meal, and now the only question is whether we will pay the check. It is that simple."

Other senators said the need for more government borrowing shows there is little fiscal discipline on Capitol Hill.

"It is like a drunken sailor asking to have the bar open all night." said Sen. Judd Gregg, R-N.H. "We should not vote for this massive increase in the debt ceiling until we get some responsible action around here on the issue of how we are going to control the debt and deficit."

Republicans also protested the size of the debt hike, arguing Democratic leaders boosted the limit enough to carry into next year and avoid having to take another vote on the politically sensitive topic before Election Day.

Democratic leaders gained the 60 votes needed to raise the limit after promising to take further steps to attack the deficit. The new debt ceiling should hold the government until next year.

All 60 votes to raise the debt ceiling were cast by Democrats and the two independent senators who caucus with them. All the votes against came from Republicans.

Sen. Harry Reid, D-Nev., voted to raise the debt ceiling. Sen. John Ensign, R-Nev., voted against raising the ceiling.

PAY-AS-YOU-GO RULES

During debate, senators voted 60-40 to revive "pay-as-you-go" rules on spending, one of the budget discipline strategies that was successful during the 1990s.

"Pay-as-you-go" generally means that most spending increases and tax cuts must be offset by spending cuts or tax hikes elsewhere. A version in place during the Clinton administration helped create budget surpluses.

"These pay-as-you-go rules are necessary because we spent the last decade spending money we did not have," said Senate Majority Leader Harry Reid, D-Nev. "We simply can no longer afford it."

Reid said the proposal would not block emergency spending. It also would allow extension of middle-class tax cuts, estate tax exemptions and continued payments to Medicare doctors.

All Democrats and the two Senate independents voted for "pay-as-you-go." All Republicans voted against it.

Republicans argued the proposal had too many holes and will lead Democrats to raise taxes.

Sen. Judd Gregg, R-N.H., said "pay-as-you-go" rules became easy to ignore or work around.

"It has been waived," Gregg said. "It has been gamed. It has been gone around. It has been stepped on. It has been ignored to the tune of $1 trillion. Pay-go is Swiss-cheese-go."

Reid voted for the "pay-as-you-go" rules. Ensign voted against them.

SPENDING PANEL DEFEATED

The Senate killed the idea of forming an 18-member bipartisan commission with authority to force Congress into votes to reduce budget deficits.

Senators voted 53-46 for the commission, but it fell short of the 60 needed.

The amendment by Sens. Kent Conrad, D-N.D., and Judd Gregg, R-N.H., created a panel with power to propose deficit reduction moves that would go to Congress for required votes. They said a tough move was warranted by the red ink flow.

Opponents said they did not want Congress to abdicate its authority to an outside body. Senators also expressed concern that a commission might force cuts in favored social programs or on tax increases.

Reid voted for the debt commission. Ensign voted against it.

BERNANKE CONFIRMED

Ben Bernanke survived criticism of his involvement in the economic crisis to win confirmation to a second four-year term as chairman of the Federal Reserve, the nation's central bank.

Senators confirmed Bernanke in a 70-30 vote. He drew the most opposition of any Fed chairman since the Senate began voting on them in 1978.

The opposition reflected both general anger at Wall Street and what some senators said was a failure by Bernanke to detect problems that led to the 2008 near-collapse of the economy.

Sen. Jeff Merkley, D-Ore., said Bernanke "ignored the housing bubble" and took no action against the growing threat from risky investment vehicles.

"Gambling on stocks and bonds and derivatives is fundamentally incompatible with bank stability," Merkley said. "But Bernanke did not respond."

Supporters credited Bernanke with managing the crisis and steering the economy back to relatively calm waters.

"I believe over the last year -- or a little more than a year -- the chairmanship of Ben Bernanke has, in no small measure, made it possible for this nation to avoid a catastrophe that I think would have looked maybe larger than the Great Depression." said Sen. Christopher Dodd, D-Conn.

Reid voted to confirm Bernanke. Ensign voted against confirmation.

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault @stephensmedia.com or 202-783-1760.