(Joshua Roberts, Reuters )
The Senate gave final approval Tuesday to legislation to raise the nation's debt limit by $2.4 trillion while cutting federal deficits, sending President Obama a hard-fought bipartisan package he was expected to swiftly sign into law.
Midday passage in the Democratic Senate came after a morning of measured speeches with little hint of the tumultuous months of debate over the size and scope of the federal government. Congress faced a midnight deadline to pay the nation's bills or risk an unprecedented federal default. The bill easily passed 74-26.
"This is an historic vote and it's one that has involved a lot of emotion and a lot of soul-searching and a lot of hard work," said Sen. Richard Durbin of Illinois, the No. 2 Democrat in the Senate.
House Speaker John Boehner was able to usher the legislation through the GOP-led House on Monday in an unusual bipartisan vote, only after relying on Democrats. "Tea party" and conservative lawmakers largely defected.
The Republican Party, whose right flank launched the debt debate, was deeply divided over the final deal.
The compromise would allow the federal government to raise the debt ceiling by as much as $2.4 trillion, which is expected to cover debt payments through the end of 2012, as Obama wanted. It would cut at least that amount from federal spending over the next decade.
Months of debate had left Washington at a bitter impasse that was only resolved in a final weekend of negotiations as the pending deadline neared. Neither Democrats nor Republicans wanted to risk a federal default. Experts have said such a result would send shockwaves through the U.S. and global economies.
The deal struck avoids the broader goal of substantial deficit reduction that Obama and Boehner once sought, and that experts have said is needed to lower the nation's unsustainable debt load.
"I too wish I could stand here today enacting something much more ambitious," said Sen. Mitch McConnell of Kentucky, the Republican leader, who had been crucial to securing the deal. "We'll be back at it."
The agreement is a pared-down package that achieves Obama's goal of extending borrowing through the next year, avoiding a repeat during a presidential campaign season as the GOP had wanted. At the same time, Boehner's goal of at least a dollar-per-dollar exchange of spending cuts to new debt was met.
Under the deal hashed out in the final flurry of negotiations, the debt ceiling will be raised in two phases. As much as $900 billion would be authorized initially, alongside more than an equal amount of spending reductions. Those cuts will hit almost every federal agency over 2012 and 2013, with specific reductions being decided by Congress later this year.
A second increase in the debt ceiling would be allowed later this year, but only after work is done to further decrease federal spending. A bipartisan congressional committee will work through fall to cut as much as $1.5 trillion over the next decade, with a vote on their proposed recommendations by Christmastime.
Congress is also expected to vote in the months ahead on a conservative priority, a balanced budget amendment to the Constitution that would be sent to the states for the ratification process, if approved.
Throughout the process, Congress will be able to vote to deny the additional debt ceiling increases, but Obama is expected to be able to veto those objections. The first of those votes is expected in September.
But if the committee deadlocks or its recommendations are not accepted by Congress, or, if the balanced budget amendment is unable to achieve the two-thirds threshold needed for passage – both scenarios that are highly likely -- at least $1.2 trillion in automatic budget cuts would be made in 2013.
Those budget cuts would hit at core areas both sides had been willing to give up in order to protect their top priorities. Republicans refused new taxes on corporations or the wealthy and Democrats were unwilling to cut Medicare, Medicaid and other entitlement programs. Instead, the agreement was made to cut evenly at other accounts – the defense budget that has been long protected by Republicans and domestic programs dear to Democrats. Both sides hope to avoid those triggered cuts and devise another deficit-reduction plan.
In many ways the final deal pushes decision making on the tougher issues contributing to the nation's deficits– entitlement spending and tax policy – into the future, ensuring they will be themes during the 2012 election season.
Freshman senators who came into office calling for fiscal discipline reject the deal as too little. The vast majority of the cuts affect future spending, not next year’s budget. By some calculations, discretionary spending would drop by $7 billion next year.
"Only in Washington would this be called a spending reduction," said Republican Sen. Kelly Ayotte of New Hampshire.