Reuters

(Reuters)

U.S. Senate Passes Budget Bill, Averting Risk of Default

Politics Dow Jones Newswires

The Senate early Friday passed legislation boosting spending levels for the next two years and raising the debt limit in a move to curb major fiscal fights until a new administration is in office.

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The bill, already passed by the House this week, now goes to the White House for President Barack Obama's signature.

Friday's early morning vote of 64-35 will enact a sweeping deal that came together only days before. Congressional leaders reached an agreement with the White House late Monday increasing spending by $80 billion through September 2017 and increasing the federal government's borrowing limit until mid-March 2017.

The Treasury Department had warned that Congress had to raise the debt ceiling by Nov. 3 to avoid risking a default on the country's debt.

Senate Democrats embraced the bill, which raises spending evenly for both military and domestic programs: $50 billion in fiscal year 2016 and $30 billion the following year. The deal is the second two-year agreement to relax the sequester, a series of across-the-board cuts that took effect in 2013. The previous deal ended in September.

The latest agreement split Republicans, dividing those who wanted to see higher defense spending from those who said the bill didn't extract enough spending reductions in exchange for increasing the debt limit.

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"We will be giving President Obama a free pass to borrow as much money as he can borrow in the last year of his office," GOP presidential candidate Sen. Rand Paul of Kentucky said on the Senate floor Thursday beside a poster of a mock "unlimited credit card" issued to Mr. Obama.

GOP leaders said the agreement secured some changes to federal safety-net programs and ensured two years of fiscal stability for the military at a time of national security threats. And they told lawmakers it was better than the alternative: an increase in the debt ceiling with no policy measures attached.

"This is a fully-offset agreement that rejects tax hikes, secures long-term savings through entitlement reforms, and provides increased support for our military--at a time when we confront threats in multiple theaters," Senate Majority Leader Mitch McConnell (R., Ky.) said Thursday.

The bill also includes patches to two federal safety-net programs that lawmakers wanted to quickly resolve before election-year pressures intensify. It will extend the solvency of the Social Security program used to help support disabled people and prevent an expected 52% increase in premiums for roughly 30% of the people enrolled in Medicare Part B, which covers outpatient care such as doctor visits.

Friday's action reflected the challenges of scheduling a vote around senators' complicated weekend itineraries and a desire to pass the legislation before any further delay could unsettle markets eager to see the debt limit raised. Many lawmakers plan events in their states beginning on Friday, and the five senators running for president have even more demanding schedules.

The bill's passage enabled former Speaker John Boehner (R., Ohio) to turn control of the House over to newly elected Speaker Paul Ryan (R., Wis.) on Thursday with no ominous fiscal fights on the horizon. Lawmakers will have to pass a detailed spending bill in December that could spark debate over policy measures.

"I have to admit that I was skeptical when he said that he wanted to clean out the barn before he left," Senate Minority Leader Harry Reid (D., Nev.) said of Mr. Boehner's plans to resolve thorny legislative issues before his departure Thursday. "But he found a way...by passing a clean debt limit and a two-year budget agreement, which should go a long way to returning the appropriations process to the way it should work."

Mr. Reid also warned Republicans not to try to stick ideological policy measures to spending bills, foreshadowing a fight that is likely to return at year's end in one of Mr. Ryan's first major tests as speaker.

House Appropriations Committee Chairman Hal Rogers (R., Ky.) said this week that lawmakers planned to start work "right away" to divvy up the deal's overall spending figures into appropriations bills that set spending levels for different parts of the government.

Those measures are likely to be combined into one large bill, known as an omnibus, that must be passed by Dec. 11, when the government's current funding expires.

Write to Kristina Peterson at kristina.peterson@wsj.com