This week the Senate approved (64-34) legislation suspending enforcement of the debt ceiling limit for three months. The bill, passed by the House (285-144) last week now goes to the president for signature. The Office of Management and Budget (OMB) has issued a Statement of Administration Policy (SAP) indicating that the president would sign the bill.
The current debt limit ($16.4 trillion) is expected to be breached by the end of February.
The bill (H.R. 325) would delay a potential default on U.S. government financial obligations by in effect ignoring the debt ceiling through May 18, 2013. Until that date, the government would continue to incur obligations and borrow funds to cover spending to meet these obligations.
On May 19, the debt limit would be reset at a level that reflects the amount of borrowing above $16.4 trillion. If there is no agreement to provide for a longer-term increase in the debt limit, the U.S. Treasury could take “extraordinary measures,” as it did in December, to keep the U.S. solvent into July.
The Senate rejected (53-45) an amendment proposed by Sen. Pat Toomey (R-PA) to pay interest on the debt, Social Security benefits, and military pay and allowances first if the debt ceiling was reached. The full Senate also tabled (54-44) an amendment that would have required a spending cut equal to the amount of increase in future extensions of the debt limit.
The Senate also agreed to a provision in the bill that was designed by House Republicans to force the Senate to pass a budget resolution this year. House Republicans have strongly criticized the Senate for not passing a budget resolution since 2009. Under the provision, the pay of House Members or Senators would be withheld if their respective chamber does not pass a budget resolution (budget blueprint that sets funding targets for the appropriations committees) by April 15, 2013. Senate Budget Committee chair Sen. Murray (D-WA) has stated that the Committee would send a FY2014 budget resolution to the Senate floor.