Legislation to raise the U.S. debt limit by $2.4 trillion failed to win House approval today in a vote Democrats said was rigged to ensure its defeat.
Republicans who control the House last week announced the vote as a way to demonstrate that lawmakers don’t support extending the $14.3 trillion debt limit without an agreement with President Barack Obama’s administration on significant spending cuts to curb government spending.
Voting in favor of raising the limit were 97 lawmakers, opposing it were 318. Support for the increase not only failed to get a simple majority, it fell far short of the two-thirds margin of lawmakers present and voting needed for passage under the streamlined procedures Republicans used to bring the measure to the floor.
The House conducted the vote as congressional leaders are seeking agreement on a package of spending cuts in negotiations chaired by Vice President Joe Biden in time to raise the debt ceiling by an Aug. 2 deadline. Biden has said negotiators are trying to find savings of $1 trillion over 10 years.
Today’s vote won’t fan fears among bond traders that the U.S. may default on its obligations because “the markets are used to considerable amount of theater before any major debt- ceiling debate,” said Lou Crandall, chief economist for the Wrightson ICAP LLC unit of London-based ICAP Plc, the world’s largest broker of trades between banks.
“People generally assume” that “these sorts of issues won’t come to a head just before the projected deadline,” he said in a telephone interview. “That’s still a couple of months off,” so “no one is anticipating an action at this point.”
For all of Washington’s debate about the deficit, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago, even though the amount of marketable debt outstanding has grown. The yield on the benchmark 10-year Treasury note was at 3.06 percent at 5:00 p.m. New York time, according to Bloomberg Bond Trader prices -- well below the average of 5.48 percent in the period from 1998 to 2001.
White House press secretary Jay Carney earlier today said the administration believes that Congress ultimately will act to raise the debt ceiling.
“Regardless of any other development the debt ceiling must be and will be raised,” he said. He declined to characterize today’s House vote, other than to say it’s “an expression of a point of view” regarding the need to address deficits.
“We share the concerns that drive those views,” he said. “In the end, the debt ceiling has to be raised.”
House Democratic Whip Steny Hoyer of Maryland said it was irresponsible for Republicans to conduct the vote “solely for the purpose” of defeating the measure. “To put something on the floor for the purpose of seeing it fail, without any opportunity to debate” shows that “this is a political charade,” he told reporters.
Kevin Smith, a spokesman for House Speaker John Boehner, said in an e-mail that President Barack Obama “and congressional Democrats have asked for a debt limit hike without any spending cuts and budget reforms,” and “this vote will show that the American people won’t tolerate that.”
In a May 24 statement issued to introduce the measure, House Ways and Means Chairman Dave Camp said he would oppose raising the debt ceiling without “significant spending cuts and budgetary reforms.”
As proposed by Camp, a Michigan Republican, the legislation would have raised the debt limit by $2.4 trillion, the amount Obama’s proposed budget said would be needed to continue U.S. borrowing through the 2012 fiscal year.
The measure “will allow the House to reject a clean increase in the debt limit, proving to American people, the financial markets and the administration that we are serious about tackling our debt and deficit problems,” Camp said in his statement.
“It is so important that we have a clear path forward” to spending cuts “given what the ratings agencies are saying about our debt,” Camp said today in floor debate.
Standard & Poor’s in April put the U.S. debt on a “negative outlook” on concern that Congress and Obama wouldn’t agree on a plan to curb medium and long-term spending.
“It would be irresponsible to increase the debt ceiling without reforms that start cutting spending,” Louisiana Republican Steve Scalise said in today’s debate.
“Enough of giving the president the uncontrolled use of the American credit card,” he said.
House Minority Leader Nancy Pelosi, a California Democrat, said Republicans were propagating a “false premise” that raising the debt limit would encourage more borrowing.
She and other Democrats also pressed the case that much of the government’s debt was accrued during Republican President George W. Bush’s administration.
Hoyer said “we need to deal with this issue seriously,” and not “as a simplistic suggestion that somehow President Obama caused this.” As examples of expenses that began under Bush, he cited $1.3 trillion spent on wars in Iraq and Afghanistan, an expanded Medicare “drug prescription bill we haven’t paid for,” and “tax cuts your party voted for” that “we didn’t pay for.”
With 87 freshmen Republican lawmakers, many elected with support of the Tea Party movement, Boehner has sought to reassure his members that he will insist in negotiations that such spending cuts are imposed as a condition of raising the debt ceiling.
Boehner has also sought to reassure bond investors that the U.S. won’t default on its financial obligations. Treasury Secretary Timothy Geithner has warned that a failure to raise the debt ceiling by Aug. 2, the date he now projects borrowing authority would be exhausted, may have catastrophic effects on the U.S. economy by sharply raising borrowing costs.
Boehner, an Ohio Republican, has said that spending cuts should exceed the amount by which Congress increases the borrowing authority.
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