Jan. 21 (Bloomberg) -- The U.S. debt limit would be raised by $1.9 trillion to $14.29 trillion under an amendment proposed in the Senate.
The chamber began debate yesterday on raising the debt ceiling for the fifth time in two years after lower tax revenue from the recession and higher stimulus spending boosted the calendar-year budget deficit to an all-time high last year.
“If Congress does not enact this legislation, and soon, then the Treasury would default on its debt for the first time in history,” said Senate Finance Committee Chairman Max Baucus, a Montana Democrat.
The White House in a statement urged lawmakers to pass the measure. “Such an increase is critically important to make sure that financing of federal government operations can continue without interruption,” it said.
The proposed ceiling would probably allow the Treasury to continue its borrowing until next year, said Michael Feroli, an economist at JPMorgan Chase & Co. in New York.
Congress passed a short-term increase in the debt limit to $12.39 trillion last month after a group of senators, led by Budget Committee Chairman Kent Conrad of North Dakota, refused to vote on a longer-term extension unless Congress created a commission to study deficit reduction.
The Obama administration reached a tentative accord with congressional Democrats to create a version of the panel by executive order, House aides said. The agreement was negotiated by House Democratic Leader Steny Hoyer of Maryland and Vice President Joseph Biden, said one of the House staffers. The aides commented on condition of anonymity.
Vote in Congress
The proposal by Conrad and Republican Senator Judd Gregg of New Hampshire would require Congress to vote on the commission’s recommendations without making any changes. With a commission created by presidential order, congressional leaders would promise to bring its proposals to a vote although such a vote wouldn’t be required by law.
A commission appointed by the president would be “a backup” if Senate sponsors can’t get the votes to pass “what we think makes the most sense,” a panel created by Congress, Conrad told reporters. He said he didn’t expect to win approval of his proposal, which Baucus opposed in a speech on the Senate floor.
Gregg told reporters that the proposal to create a commission by executive order was “a very cynical act by the administration” that “is by definition partisan and the whole purpose” is to have a bipartisan body.
“There is no way you can require a vote” by Congress so “it’s a nothing-burger,” Gregg said.