Debt limit extension bill passes House

24 Jan

images(Reuters) – The House of Representatives on Wednesday passed a Republican plan to allow the federal government to keep borrowing money through mid-May, clearing it for fast enactment after the top Senate Democrat and White House endorsed it.

The vote in the Republican-controlled House was 285-144, with no votes coming from 33 Republicans and 111 Democrats.

 

The measure avoids for the time being a repeat of the 2011 debt ceiling standoff that rattled markets and resulted in a downgrade of the government’s triple-A credit rating. The Treasury is expected to exhaust remaining 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 Wednesday’s vote that Republicans would take the next opportunity – automatic budget cuts set for March – to demand “reforms” from Obama.

 

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

BREATHING SPACE

 

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

 

Boehner, who unveiled the short term extension plan last week, said he and fellow House Republicans were committed to passing a budget that would be balanced in 10 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.

 

The government is currently on track for its fifth straight fiscal year with a deficit exceeding $1 trillion – a trajectory widely viewed as eventually leading to a debt downgrade.

Source: Reuters

 

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