US Congress raises government debt ceiling to $12.4 trillion

China Daily
12/24/2009

WASHINGTON: A divided US Senate gave final congressional approval on Thursday to a $290 billion hike in the federal debt limit, enough to finance the record US deficit for another two months while the United States digs out from the worst recession since the 1930s.

On a largely party-line vote of 60-39, the Democratic-led Senate approved legislation to increase the debt limit from its current ceiling of $12.1 trillion. One Republican voted yes and one Democrat voted no.

The measure, passed last week by the House of Representatives, goes to President Barack Obama to sign into law.

Most Republicans balked at raising the limit, accusing Democrats of swelling the debt with reckless spending.

Democrats noted that the debt exploded during the administration of Obama’s predecessor, Republican President George W. Bush.

The Treasury Department has warned that the United States would likely reach the current debt limit by December 31, potentially putting the nation at risk of default on its debt for the first time in the country’s history.

“The US government is in a hole, fiscally speaking, but our leaders cannot seem to stop digging,” said Senator Judd Gregg, the most senior Republican on the Senate Budget Committee.

Senate Finance Committee Chairman Max Baucus, a Democrat, responded by making a plug for sweeping healthcare legislation that the Senate passed earlier on Thursday and will now go to the House for consideration.

“The road to fiscal security begins with passing comprehensive healthcare reform legislation, which independent, nonpartisan authorities have made clear reduces our long-term deficit and puts this nation back on track toward fiscal responsibility,” Baucus said.

Critics, however, argue that expected revenue increases and cost savings in the legislation may never materialize and that the budget deficit would actually swell.

Democratic leaders had hoped to raise the limit by at least $1.8 trillion, enough to ensure they wouldn’t have to revisit the issue before the November 2010 congressional elections.

But they were unable to reach an agreement with members of their own party on what measures to attach to such legislation to get the debt under control.

The smaller increase provides more time to reach a deal by members of both parties.

The government posted a record $1.4 trillion deficit in the fiscal year ended September 30 and is on track this year to spend at least $1 trillion more than it collects.

The debt has more than doubled since 2001, thanks to wars in Iraq and Afghanistan, tax cuts and the recession, which has caused tax revenues to plunge and safety-net spending to rise.

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