Posted on Thu, Jan. 28, 2010
last updated: January 28, 2010 02:58:00 PM
WASHINGTON — The Senate voted 60-40 on Thursday for tough new curbs on federal spending, imposing a requirement that key parts of the budget must be paid for with spending cuts or tax increases to prevent the federal deficit from increasing. The new terms were added to legislation to increase the nation's debt limit.
The bill, which next needs approval by the House of Representatives and President Barack Obama to become law, would allow the debt to grow by $1.9 trillion to $14.29 trillion. Moderate Democrats and most Republicans had been wary of supporting the debt limit increase without stronger assurances that future spending would be controlled.
The pay-as-you-go measure won enough centrists to allow the debt limit bill to proceed; it passed by a 60 to 39 vote.
"Let's not kid ourselves: we are in this financial situation — and these pay-as-you-go rules are necessary — because we spent the last decade spending money we didn't have," said Senate Majority Leader Harry Reid, D-Nev., the measure's chief sponsor.
"We spent trillions on two wars, tax breaks for multimillionaires and corporations, and other policies. Those days are over. We simply can no longer afford it."
The plan has some exemptions — too many, Republicans said — including a permanent extension of Bush-era middle class tax cuts, certain Medicare payments to physicians, and extensions of relief from the alternative minimum tax and the estate tax.
It requires virtually all other future spending increases or tax cuts to be offset so that they don't increase budget deficits. That means that many of the Bush administration tax cuts for the wealthy, due to begin expiring at the end of this year, would have to be paid for with offsetting cuts in spending or other new taxes if they're retained, as many Republicans want.
The vote to raise the national debt limit came on a party-line vote, with 58 Democrats and two independents voting for the measure while all 40 Republicans opposed it. It came 12 hours after President Obama urged lawmakers in his State of the Union address to get spending under control.
The vote sent two signals: One, that a core of Republicans and Democrats are eager to find ways to cut the deficit, which the nonpartisan Congressional Budget Office estimates will reach $1.35 trillion this fiscal year; and two, that it will be a difficult process.
The Senate came close to imposing an even stricter fiscal limit, failing by four votes to approve a bipartisan plan to put strict curbs on spending for the next five years. That proposal got 56 votes but needed 60 for passage under Senate rules. It was backed by 39 Republicans, 16 Democrats and one independent.
The votes suggested trouble ahead. In a few weeks, Democrats will control one less seat, when Sen.-elect Scott Brown of Massachusetts is sworn in to replace Sen. Paul Kirk.
In addition, Republicans argued that the pay-as-you-go rule would make it difficult to approve new tax cuts, and Sen. Judd Gregg, R-N.H., the top Republican on the Senate Budget Committee, complained that Reid's plan was nothing more than a gimmick. Congress currently has weak pay-as-you-go rules, but routinely ignores them.
"Pay-as-you-go is used to make a statement that you're going to be fiscally responsible," Gregg said, "but it doesn't happen. This is a political cover vote."
Reid argued that unlike current rules, his plan would carry the force of law. It would mean that most new spending programs would have to be paid for without increasing the deficit, either by offsetting cuts in other spending or tax increases. If Congress and the president can't agree on how to offset the increased spending, cuts in spending would be imposed across the board.
Similar rules were in place during the 1990s, and many budget analysts credit them with helping produce balanced budgets late in the decade. The rules were allowed to expire in 2002.
House Democrats have long favored a pay-as-you-go rule, with exemptions for emergency spending.
On a related matter, House Speaker Nancy Pelosi, D-Calif., backed Obama's call for a three-year freeze on non-security discretionary spending, and went a step further.
Military contractors should also be subject to the freeze, she said, though military personnel should not.
"I don't think we should protect military contractors," Pelosi said. "I don't think the entire defense budget should be exempted."
MORE FROM MCCLATCHY