WASHINGTON (AP) — The Senate Thursday took up must-do legislation to permit the government to borrow hundreds of billions of dollars more to meet its obligations, putting off one Washington showdown even as others loom in coming weeks.
The measure would suspend the $16.4 trillion limit on federal borrowing through May 18, allowing about $450 billion in new debt to be added to the federal ledger, according to an estimate by the Bipartisan Policy Center.
The Republican-controlled House passed the legislation last week. A successful Senate vote Thursday afternoon would send the measure to President Barack Obama, who is expected to sign it into law immediately.
Without the bill, the government would default on its obligations by as early as mid-February.
"Failure to pass this bill will set off an unpredictable financial panic that would plunge not only the United States, but much of the world, back into recession," said Sen. Max Baucus, D-Mont. "Every single American would feel the economic impact."
The short-term increase in the borrowing cap is the brainchild of House Republicans, who wanted to re-sequence a series of upcoming budget battles, taking the threat of a potentially devastating government default off the table and instead setting up a clash in March over automatic across-the-board spending cuts set to strike the Pentagon and many domestic programs.
Those cuts — postponed by the recent "fiscal cliff" deal — are the punishment for the failure of a 2011 deficit supercommittee to reach an agreement. The panel was itself established by the hard-fought 2011 increase in the debt limit.
Democrats are going along because the debt increase isn't contingent on matching cuts to the budget, as long demanded by House Speaker John Boehner, R-Ohio.
Is that simply a suspension of the limit until May 18, or will some higher cap be put in place? If it's just a suspension until May 18, then any smart Sec. of the Treasury would borrow a heck of a lot before May 18, so he'd have enough to last through the summer, at least. That would give Congress time to argue at least through the summer, with less ill effects.