House Passes, Senate Rejects GOP Debt-Ceiling Plan

House Speaker John Boehner gives a thumbs up after the chamber passed his plan Friday to raise the debt ceiling and cut spending. The Senate voted to kill the measure a short time later. i i

House Speaker John Boehner gives a thumbs up after the chamber passed his plan Friday to raise the debt ceiling and cut spending. The Senate voted to kill the measure a short time later. Alex Wong/Getty Images hide caption

itoggle caption Alex Wong/Getty Images
House Speaker John Boehner gives a thumbs up after the chamber passed his plan Friday to raise the debt ceiling and cut spending. The Senate voted to kill the measure a short time later.

House Speaker John Boehner gives a thumbs up after the chamber passed his plan Friday to raise the debt ceiling and cut spending. The Senate voted to kill the measure a short time later.

Alex Wong/Getty Images

In an unforgiving display of partisanship, the Republican-controlled House approved emergency legislation Friday night to avoid an unprecedented government default and Senate Democrats scuttled it less than two hours later in hopes of a better deal.

"We are almost out of time" for a compromise, warned President Obama as U.S. financial markets trembled at the prospect of economic chaos next week. The Dow Jones average fell for a sixth straight session.

Lawmakers in both parties said they were determined to avoid a default, yet there was little evidence of progress — or even significant negotiations — on a compromise during a long day of intense political maneuvering.

The House vote was 218-210, almost entirely along party lines, on a Republican-drafted bill to provide a quick $900 billion increase in U.S. borrowing authority — essential to allow the government to continue paying all its bills along with $917 billion in cuts from federal spending.

It had been rewritten hastily overnight to say that before any additional increase in the debt limit could take place, Congress must approve a balanced-budget amendment to the Constitution and send it to the states for ratification. That marked a concession to Tea Party-backed conservatives and others in the rank and file who had thwarted House Speaker John Boehner's attempt to pass the bill Thursday night, like Texas Republican Louis Gohmert.

"I've said from the beginning that in order to vote to raise the debt ceiling, there will have to be something that is such a game changer, such a provision that allows us to stop taking this country to the dust bin of history," Gohmert says, "and I believe a balanced-budget amendment, if it has a cap on spending, could do that."

During debate on the measure Friday, Boehner, who's had to deal with uncompromising Tea Party members and with the White House, indicated it's been a difficult few weeks.

"I stuck my neck out a mile to try to get an agreement with the president of the United States," he said. "I stuck my neck out a mile. I put revenues on the table in order to try to come to an agreement to avert us being where we are. Well a lot of people in this town can never say yes."

But the changes Boehner made to the House GOP bill further alienated Democrats, and they complicated prospects of a compromise that could clear both houses and win Obama's signature by next Tuesday's deadline.

At the other end of the Capitol, Senate Democrats rejected the measure without so much as a debate. The vote was 59-41, with all Democrats, two independents and six Republicans joining in opposition.

Senate Majority leader Harry Reid (D-NV) sounded exasperated about the House attaching the balanced-budget amendment to the debt ceiling.

"The extremism of these people. They're not satisfied with a vote on it. They want a guarantee that it pass before they'll allow an extension of the debt limit," he said. "I mean how bizarre can anyone be?"

'Our Last Chance'

Moments after the Senate tabled the House bill, Reid unveiled an alternative that would cut spending by $2.4 trillion and raise the debt limit by the same amount, enough to meet Obama's terms that it tide the Treasury over until 2013.

Reid invited Republicans to suggest changes, saying, "This is likely our last chance to save this nation from default."

The Senate GOP leader, Mitch McConnell of Kentucky, accused Democrats of "rounding up 'no' votes to keep this crisis alive," and noted the House had passed two bills to raise the debt limit and the Senate none.

The House, eager to return the Senate's favor rejecting the Boehner bill, set a vote to reject Reid's proposal on Saturday. The Senate set a test vote for shortly after midnight on Sunday, a middle-of-the-night roll call that underscored the limited time available to lawmakers

At the same time Reid appealed for bipartisanship, he and other party leaders accused Boehner of caving in to extremists in the GOP ranks — "the last holdouts of the Tea Party," Sen. Richard Durbin of Illinois called them.

Republicans conceded that the overnight delay had weakened Boehner's hand in the endgame with Obama and Senate Democrats.

But the Ohio Republican drew applause from his rank and file when he said the House, alone, had advanced legislation to cut deficits, and that he had "stuck his neck out" in recent weeks in hopes of concluding a sweeping deficit reduction deal with Obama.

Balanced-Budget Amendment

Boehner's measure would provide a quick $900 billion increase in borrowing authority essential for the U.S. to keep paying all its bills after next Tuesday and $917 billion in spending cuts. After the bill's latest alteration, any future increases in the debt limit would be contingent on Congress approving the constitutional amendment and sending it to the states for ratification.

"With conservatives insisting on the addition of a balanced-budget amendment requirement, Speaker Boehner's bill will now cut, cap and balance" federal spending, said Rep. Jeff Flake of Arizona as Friday's scheduled vote approached.

The White House called the bill a non-starter. Press secretary Jay Carney issued a statement that called it a "political exercise" and said congressional leaders should turn their efforts to a compromise that Obama can sign by Tuesday.

The developments occurred one day after Boehner was forced to postpone a vote in the House for fear the earlier version of his measure would suffer a defeat. But by forcing a delay the conservative rebels upended the leadership's strategy of making their bill the only one that could clear Congress before a default and win Obama's reluctant signature.

"Everybody acknowledges that because of the dust-up yesterday we've lost some leverage," said Rep. Steven LaTourette (R-Ohio) an ally of the speaker.

The rebels said they were more worried about stemming the nation's steady rise of red ink.

Rep. Jeff Landry (R-LA), a first-term lawmaker, issued a statement saying his pressure had paid off.

"The American people have strongly renewed their November calls of bringing fiscal sanity to Washington. I am blessed to be a vehicle driving their wishes to fruition," he said. "This plan is not a Washington deal but a real solution to fundamentally change the way Washington operates."

Administration officials say that without legislation in place by Tuesday, the Treasury will no longer be able to pay all its bills. The result could inflict significant damage on the economy, they add, causing interest rates to rise and financial markets to sink.

Executives from the country's biggest banks met with U.S. Treasury officials to discuss how debt auctions will be handled if Congress fails to raise the borrowing limit before Tuesday's deadline.

But Carney said the administration did not plan to provide the public with details Friday on how the government will prioritize payments.

The day's economic news wasn't very upbeat to begin with an economy that grew at an annual rate of only 1.3 percent in the second quarter of the year.

The Dow Jones industrial average suffered through a sixth straight day of losses, and bond yields fell as investors sought safer investments in the event of a default.

At the White House, Obama cited the potential toll on the economy as he urged lawmakers to find a way out of gridlock.

He said that for all the partisanship, the two sides were not that far apart. Both agree on initial spending cuts to take effect in exchange for an increase in the debt limit, he said, as well as on a way to consider additional reductions in government benefit programs in the coming months.

"And if we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I'll support that, too, if it's done in a smart and balanced way," he said.

Brian Naylor contributed to this report, which includes material from The Associated Press.

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