WASHINGTON — The Senate on Thursday passed and sent to President Reagan a $20-billion increase in the national debt limit, averting the possibility that the government later this month would be unable to pay its bills.
The 58-36 vote, increasing the debt limit to $2.32 trillion, postponed until mid-July a showdown over federal budget cuts that conservative Sen. Phil Gramm (R-Tex.) had threatened to stage as part of the debt extension debate.
Gramm had wanted to attach a separate deficit reduction measure to the debt limit bill in an attempt to force the Senate to pass it.
But White House Chief of Staff Howard H. Baker Jr., the former Senate Republican leader, traveled to Capitol Hill on Thursday to convince Gramm and his supporters to refrain from offering any amendments that might delay action on the debt limit issue.
Warns of Disruptions
Baker argued that "with the currency problems in the world and the yen-dollar problem, and the bond market in chaos," even a brief delay in raising the limit on how much the government can borrow could cause serious disruptions, according to Sen. Pete V. Domenici (R-N.M.).
Treasury officials had said that without an extension of the current debt limit, the government would run out of credit Friday night and would have to begin spending its cash reserves, which would last only until May 28. The new extension of the debt limit will expire July 17. At that time, Congress will have to take action to raise the limit again.
In his meeting with Senate Republicans, Baker promised that the Administration will support renewed efforts to support Gramm's budget-cutting measure when the next debt limit bill comes up this summer. Gramm's legislation, co-authored by Sen. Warren B. Rudman (R-N.H.), would provide a mechanism for enforcing incremental reductions in the budget deficit.
No Agreement on Targets
The Supreme Court last year threw out the original provision for automatic cuts in the Gramm-Rudman budget balancing law. In the absence of mandatory cuts, Congress and the Administration have failed to reach the deficit reduction targets set out in the law.
The Administration and the Democratic majorities in Congress have been deadlocked over further steps to reduce the deficit. The Administration has argued that the first step must be congressional approval of changes in the budget process that would give the President more power to trim spending.
The Democrats have insisted on a budget "summit" with the Administration to negotiate a package of spending cuts and tax increases. Budgets drafted by the Democrats and passed by the House and Senate call for about $18 billion in new taxes for the 1988 fiscal year.