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Senate passes bill to suspend debt ceiling ahead of budget negotiations.
A bill to suspend the United States’ debt ceiling until May has been passed in the Senate in a 64-to-34 vote. Following an earlier 285-to-144 vote in the House of Representatives, the bill must now be signed by President Obama for it become law.
Intended maintain the United States’ credit, the bill allows the federal government to borrow an additional $450bn to pay interest on existing debts and maintain social security and salary payments.
Rather than resolve the political divide between Republicans and Democrats, the bill grants lawmakers more time to develop new legislation to resolve the country’s economic problems before federal negotiations being in four weeks time.
Congressional Republicans are demanding that an increase to the debt ceiling must be coupled to an equal amount of federal spending cuts, whilst Democrats argue that an increase in taxes should be included in legislation.
Before the vote senior Democratic Senator, and chairman of the Armed Services Committee, Carl Levin drafted legislation to raise $200bn through closing tax loop holes, increasing taxes on the exercise of stock options and stopping preferential treatment for private equity and hedge fund managers.
Arguing that the “fiscal situation is grave enough, the threat of sequestration is so serious in terms of its impact on our domestic priorities and on our security” Senator Levin said he believed “that if we can get this in front of the Congress, because it will have huge public support, it will pass”.
Senator Levin’s views contrast starkly with Republican Senator Tom Coburn who argued before the vote that not passing the bill could be a “wonderful experiment” for the government not to spend money on “stupid things” and that all federal spending commitments could still be paid without raising the debt ceiling.
During a radio interview Senator Coburn stated that “we’re going to collect $200 billion a month if in fact the government were to not extend the debt limit”, and that “Social Security would be paid, Medicare would be paid, the essentials would be paid. It’s the non-essentials that wouldn’t be paid, it’s the $250 to $300 billion a year in stupid things we do that we wouldn’t pay. It’s the programs that aren’t an absolute necessity that wouldn’t get funded, the things that would be a necessity would get funded”.
In a letter to Republican Speaker of the House of Representatives, John Boehner, out-going Treasury Secretary Timothy Geithner stated that due to the current debt ceiling limit the government would soon lose the ability to borrow the funds necessary to fulfil its obligations if “Congress does not act to extend borrowing authority”.
Mr Geithner’s argument was supported by President Obama, who said that “If congressional Republicans refuse to pay America’s bills on time, Social Security checks and veterans’ benefits will be delayed” and could leave the government unable to “pay our troops, or honor our contracts with small business owners”.
