Thursday, November 18, 2004

Senate Backs Higher Debt

The New York Times
November 18, 2004

Senate Backs Higher Debt

WASHINGTON, Nov. 17 - Faced with the prospect of a government unable to pay its bills, the Senate voted on Wednesday to raise the federal debt limit by $800 billion.

Though an increase in the debt ceiling was never in doubt, Republican leaders in both houses of Congress postponed action on it last month, until after the elections, to deprive Democrats of a chance to accuse them of fiscal irresponsibility.

The bill, if approved by the House in a vote expected on Thursday, would authorize the third big increase in the federal borrowing since President Bush took office in 2001. Federal debt has ballooned by $1.4 trillion over the past four years, to $7.4 trillion, and the new ceiling would allow borrowing to reach $8.2 trillion.

With no end in sight to the huge annual budget deficits, which hit a record of $412 billion this year, lawmakers predicted on Wednesday that the new ceiling would probably have to be raised again in about a year.

Democrats, still stinging from their election defeats, voted against the measure and argued that it should be accompanied by rules that would force Congress to pay for new tax cuts with spending cuts or tax increases elsewhere.

"I don't remember anyone during the elections making a promise to raise the federal debt to $8.1 trillion," Senator Kent Conrad, Democrat of North Dakota, said. "What we're doing here is just writing another blank check and saying to this administration, 'Go ahead, continue to run record budget deficits.' "

Administration officials have been pleading for an increase in the debt limit since last August, and the Treasury Department has been tapping into Civil Service retirement accounts since Oct. 14 to avoid breaching the limit.

On Tuesday, Treasury Secretary John W. Snow warned that the administration had "exhausted" all the previously used financial maneuvers. The government can probably keep paying bills until early next month, but the Treasury Department would have to postpone an auction of new Treasury securities scheduled for Monday.

Raising the legal borrowing limit has long been more political theater than substantive decision making, because lawmakers ultimately have no choice in the matter if the government is to stay in operation.

The 52-to-44 vote was almost purely along party lines, with one Republican, Senator John Ensign of Nevada, voting against a higher ceiling.

Two Democrats, Senators John B. Breaux of Louisiana and Zell Miller of Georgia, voted in favor of the measure.

Some Republican lawmakers had hoped to bury the measure in a broader spending bill that would attract less attention and that many Democrats would feel compelled to support. But Senate leaders decided to vote on a stand-alone bill in exchange for a commitment from Democrats to limit the debate.

"We've come to a general agreement to move ahead today," Senator Bill Frist, the majority leader, said. "The House literally is waiting for us to act."

In a muted floor debate, Democrats did almost all the talking - all aimed at castigating the administration and its Congressional allies for indulging in "borrow and spend" policies - while Republicans grimly waited for the debate to end and the vote to begin.

Senator John Kerry of Massachusetts, in his first appearance on the floor since losing the presidential election, said the growing debt threatened economic security.

"To pay our bills, America now goes cup in hand to nations like China, Korea, Taiwan and Caribbean banking centers," Mr. Kerry said. "Those issues didn't go away on Nov. 3, no matter what the results."

Administration officials contend that the annual deficits are undesirable but necessary to help stimulate an economic recovery and fight a global war on terrorism.

Mr. Bush has promised to reduce the deficit by half over five years, though the administration is fighting to make its tax cuts permanent and may need more than $70 billion in extra money next year to support military operations in Iraq.

House Republicans said they would schedule a vote on the bill for Thursday evening.

"We'll get it done," John Feehry, a spokesman for House Speaker J. Dennis Hastert, said. "We have an obligation to keep the government in operation."