Democrats' scramble to beat new deadline: Scott Brown's arrival

Senate Democrats raised the debt ceiling to $14.3 trillion and passed a pay-as-you-go measure Thursday. Both needed 60 votes. But a bid to cap federal spending exposed different fault lines.

Senate Democrats, on a strict party-line vote, passed a joint resolution Thursday that would increase the amount of debt that Congress permits the nation to carry forward by $1.9 trillion. The federal statutory debt limit now stands at $14.29 trillion.

The measure comes just in time. The US Treasury on course to hit the current debt limit sometime this spring.

But there was also a political deadline looming. With the swearing-in next month of Sen.-elect Scott Brown (R) of Massachusetts, Senate Democrats will lose the 60 vote majority needed to block filibusters, provided that all Democrats and two Independents vote together.

Thursday's debt-limit vote signaled how crucial those 60 votes are for the Democratic majority.

Pay-as-you-go gets go ahead

Democrats also needed all 60 votes to pass an amendment on the debt-limit bill, which makes so-called pay-as-you-go (PAYGO) rules a statutory requirement for Congress.

That means that all new tax and mandatory spending must be budget-neutral. In other words, if there is a deficit at the end of the year, the law mandates automatic spending cuts for non-exempt programs.

“Let’s not kid ourselves. We’re in this financial situation, and these pay-as-you-go rules are necessary because we spent the decade spending money we didn’t have,” said Senate majority leader Harry Reid during Thursday’s floor debate.

In response, Sen. Judd Gregg (R) of New Hampshire, the top Republican on the Senate Budget Committee, noted that a nonbinding PAYGO guideline was already in place during the past two years, and Congress waived it to the tune of $1 trillion in spending. The new amendment makes PAYGO legally binding, but Republicans aren't convinced that will make a difference.

“The idea that PAYGO is a substantive exercise around here is just politically inaccurate,” said Senator Gregg. “PAYGO is used to make a statement that you’re going to be fiscally responsible, but it doesn’t happen.”

Spending freeze shows new split

In his State of the Union address last night, President Obama called for a three-year freeze in government spending, starting in 2010, with the exception of spending related to national security, Medicare, Medicaid, and Social Security.

But even before the address, the Senate had begun work on a measure that would cap spending for five years, beginning in fiscal year 2010. Moreover, the measure would limit spending on overseas deployments to $130 billion in FY 2010 and $50 billion for each of the next four years.

With 56 votes, the measure failed to get the 60 needed to prevent a filibuster. But notably, this vote did not split along party lines: 39 Republicans and 16 Democrats, mainly relative newcomers to the Senate, backed the amendment.

“I am very concerned about where we are fiscally,” said Sen. Bob Corker (R) of Tennessee, after the vote. “For a guy here for three years, it’s striking to see the lack of structure and culture for fiscal discipline here.”

Sen. Claire McCaskill (D) of Missouri, a cosponsor of the amendment with Sen. Jeff Sessions (R) of Alabama, echoed Senator Corker's sentiment. “If you look at Democrats who voted for the spending freeze, most have been in the Senate three years or less,” she said. “They have a different take on what it takes to keep our fiscal house in order.”

Senate majority leader Reid said the 56-to-44 vote was not a rejection of the president’s proposal to rein in discretionary spending. Senators on the appropriations committee “understand how important it is that we freeze domestic discretionary spending. That doesn’t mean we can’t move things around within the framework of the money that we have,” he added. “And we’re going to do that.”

And now the bad news: the debt

In a hearing before the Senate Budget Committee Thursday, Congressional Budget Office Director Douglas Elmendorf told senators that if current laws
and policies remain unchanged, the federal budget would show a deficit of about $1.3 trillion for fiscal year 2010.

“By the end of 2020, the debt is projected to climb to $15 trillion or 67 percent of GDP,” he said. CBO projects that the government’s annual spending on net interest will more than triple between 2010 and 2020, from $207 billion to $723 billion.

“It’s good for the president to talk about a spending freeze,” said Senator Sessions. “I assume he’ll stand by his ... threat" to veto any budget where discretionary spending is not balanced.

-----

Follow us on Twitter.