Congress, White House OK debt extension

Dow Jones drops; rating agencies issue warning

Senate Majority Leader Harry Reid, Nevada Democrat, and Sen. Charles E. Schumer, New York Democrat, speak to the media on Capitol Hill after the Senate passed the debt ceiling plan on Aug. 2, 2011. (Drew Angerer/The Washington Times)Senate Majority Leader Harry Reid, Nevada Democrat, and Sen. Charles E. Schumer, New York Democrat, speak to the media on Capitol Hill after the Senate passed the debt ceiling plan on Aug. 2, 2011. (Drew Angerer/The Washington Times)
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Hemmed in by the looming threat of a historic default, Congress and the White House on Tuesday gave final approval to a $2.4 trillion debt extension that keeps government borrowing and spending on track, and redefines the debt-increase debate forever.

President Obama and the bipartisan coalition that powered the legislation through Congress with amazing speed said they had staved off dire economic consequences, but Wall Street seemed unconvinced as the Dow Jones industrial average tumbled amid poor consumer spending news and top credit-rating agencies warned that the world’s largest economy needed to do more to restrain spending.

Moody’s Investors Service left its AAA U.S. credit rating unchanged but added a “negative” warning.

And even before Mr. Obama’s signature was attached to the debt increase, Republicans and Democrats were already fighting over the next step: how to constitute the 12-member super committee that will recommend $1.5 trillion in deeper savings by the end of this year.

Still, for Tuesday at least, both ends of Pennsylvania Avenue basked in the bipartisanship of the 74-26 vote in the Senate, which followed Monday’s 269-161 approval in the House.

Senate Minority Leader Mitch McConnell, Kentucky Republican, speaks to the media on Capitol Hill after the Senate passed the debt ceiling plan on Aug. 2, 2011. (Drew Angerer/The Washington Times)

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Senate Minority Leader Mitch McConnell, Kentucky Republican, speaks to the media on ... more >

The deal makes history by attaching for the first time spending cuts to a debt-limit increase — something Republicans said would constitute a new standard for future administrations.

“Never again will any president from either party be allowed to raise the debt ceiling without being held accountable for it by the American people,” said Senate Minority Leader Mitch McConnell, the Kentucky Republican whose last-minute negotiations with Vice President Joseph R. Biden produced the default-saving deal.

Democrats, meanwhile, took heart in playing defense: They said they kept the cuts lower than they otherwise would have been, and staggered them so the deeper bites come in the out years of this decade.

And Democrats, who control the White House and Senate, were already looking forward to the upcoming fight in the special deficit committee, insisting that tax increases will have to be a part of any deal that the panel produces.

“The only way we can arrive at a fair arrangement for the American people with this joint committee is to have equal sharing. It’s going to be painful,” said Senate Majority Leader Harry Reid, Nevada Democrat.

That committee must report back by Thanksgiving and Congress is required to vote by Christmas, setting up two new potential crisis deadlines similar to this week’s debt deadline.

Treasury officials had said the government would bump up against its $14.29 trillion borrowing limit some time Tuesday and, without an increase, would have had to suspend some payments. Among the options were halting Social Security or veterans’ benefit checks, stopping payment on government contracts or defaulting on interest payments.

Months of negotiations over a broader package broke down in recent weeks, and Tuesday’s new law turned out to be more of the least common denominator of what all sides could agree to.

In the White House Rose Garden shortly before he signed the bill into law, Mr. Obama said it was “just a first step” — but he also said that with the economy still sputtering after three years, Washington needs to take another look at what it can do to create jobs.

He proposed another round of infrastructure spending, and said he wants to extend unemployment benefits and the payroll-tax cut all parties agreed to in December.

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