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House approves $1.1 trillion spending measure


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By ANDREW TAYLOR, Associated Press Writer

WASHINGTON – Democrats are muscling through a deficit-swelling spending bill, giving domestic programs their third major boost this year and awarding lawmakers with more than 5,000 home-state projects.

The House voted 221-202 Thursday to pass the 1,088-page, $1.1 trillion measure — combining $447 billion in operating budgets with about $650 billion in payments for federal benefit programs such as Medicare and Medicaid. The Senate immediately voted to begin debate, with a final vote likely this weekend.

No House Republicans voted for the bill. Some 28 Democrats, chiefly moderates and abortion opponents, opposed it.

The measure provides spending increases averaging about 10 percent to programs under immediate control of Congress. It comes on top of an infusion of cash to domestic agencies in February's economic stimulus bill and a $410 billion measure in March that also bestowed budget increases well above inflation.

Also Thursday, Speaker Nancy Pelosi, D-Calif., confirmed that the House will vote to raise the cap on government borrowing, currently set at $12.1 trillion. The hike in the debt ceiling is likely to exceed $1.5 trillion so that another politically excruciating vote to raise the limit won't be needed next year.

The deficit for the 2009 budget year registered $1.4 trillion and a comparable deficit is expected for 2010 — and that's before Congress spends up to $100 billion to renew extended jobless payments and health insurance subsidies for the unemployed and passes legislation intended to create jobs.

"When are we going to say, 'Enough is enough?'" asked House GOP Leader John Boehner of Ohio. "Let's stop the madness."

In fact, the gravy train may slow next year, assuming President Barack Obama follows through on his promise to bring unsustainable trillion-dollar-plus deficits under control. His budget director has ordered agencies to brace for a spending freeze as part of a midterm election-year push to rein in record budget shortfalls.

The spending bill blends increases for veterans' programs, NASA and the FBI with a pay raise for federal workers and help for car dealers. It bundles together six of the 12 annual spending bills, capping a dysfunctional appropriations process in which House leaders blocked Republicans from debating key issues and Senate Republicans dragged out debates.

Just the $626 billion defense bill would remain. That's being held back to serve as a vehicle to advance must-pass legislation such as the debt increase.

The measure contains 5,224 so-called earmarks totaling $3.9 billion, according to Taxpayers for Common Sense, a Washington-based watchdog group. Republicans and Democrats share in the largesse, which includes grants to local police departments, money for road and bridge projects, and community and economic development grants.

Democrats made no apologies for the spending increases, saying that domestic programs starved under eight years of President George W. Bush.

"I see these bills as an opportunity to reverse years of neglect — neglect to our roads and bridges, neglect to our lower-income neighbors and friends, neglect to our education system, neglect to our veterans," said Rep. Jim McGovern, D-Mass.

Democrats forced a $151 million cut to Obama's almost $2.8 billion request for economic and security aid to Afghanistan this week. Obama's $1.6 billion request for aid to Pakistan would be cut $124 million. But Appropriations Committee Chairman David Obey, D-Wis. — a top skeptic about the Afghanistan war — said the cuts were not intended as a rebuke to Obama.

For the more than 2,000 Chrysler and GM dealers closed or facing closure, the bill would offer an improved binding arbitration process to challenge the automakers' decisions. It also renewed for two more years a federal loan guarantee program for steel companies.

Rep. Bennie Thompson, D-Miss., chairman of the House Homeland Security Committee, protested a provision to let Amtrak passengers carry handguns in their checked baggage, provided the guns are unloaded and locked in a secure container. The policy would go into place within a year.

The bill caps a heated debate over Obama's order to close the Guantanamo Bay jail in Cuba. It would permit detainees held at Guantanamo to be transferred to the United States to stand trial but not to be released.

Republicans also blasted moves by Democrats to drop several social policy provisions that conservatives had championed for years. A long-standing ban on the funding of abortion by the District of Columbia government would be overturned, igniting strong opposition from anti-abortion lawmakers. The bill also overturns a ban on federal money for needle exchange programs in the city, phases out a D.C. school voucher program favored by Republicans and opens the door for the city to permit medical marijuana.

It would also lift a nationwide ban on the use of federal funds for needle-exchange programs.

Federal workers would receive pay increases averaging 2 percent, with people in areas with higher living costs receiving slightly higher increases.

Republicans claimed the measure would mean a 33 percent increase for foreign aid and the State Department, but once war-related funding and emergency funding shuffles are taken into account, the increase is more like 10 to 15 percent. A Democratic press release actually claims a modest overall spending cut but then lists a host of sizable gains when describing specific programs.

The increases to foreign aid were not directed at individual countries as much as initiatives such as health programs, food aid and developmental assistance for poor countries, and funding for additional foreign service officers.

The Senate voted 56-43 to take up the measure, short of the 60 votes needed to defeat a GOP filibuster. But Democratic leaders are confident several senior GOP members of the Appropriations Committee will support the measure when a 60-vote threshold is needed, most likely Satuday.

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Senate votes to raise debt ceiling

WASHINGTON (Reuters) — With the government running out of borrowing authority, the Senate voted Tuesday to raise the nation's debt limit by $450 billion.

In a 68-29 vote, the Democrat-led Senate agreed to raise the $5.95 trillion debt ceiling to $6.4 trillion. The bill goes to the House of Representatives, where Republican leaders have made clear they would prefer not to have a direct vote on increasing the nation's debt. Instead they want to take a more politically palatable approach and attach it to a must-pass emergency counterterrorism spending bill.

House and Senate negotiators are expected to meet soon to work out differences between their respective versions of that supplemental spending bill. House Majority Leader Dick Armey, a Texas Republican, said after the Senate action that a separate vote in the Republican-led House on raising the debt limit is impossible.

"Our best chance of getting it done is in the conference on the supplemental," Armey told reporters.

The amount approved by the Senate is far less than the $750 billion increase the White House sought. But Senate Democrats were reluctant to grant the administration the full amount, blaming President Bush's $1.35 trillion tax cut last year for forcing the government to borrow more money.

The administration blames lower-than-expected tax receipts for increasing its borrowing needs.

Democrats said the $450 billion increase is enough borrowing authority to get the government through the November congressional elections and into next year.


The administration has warned that failure to raise the debt limit by the end of June could disrupt Social Security payments next month.

The Treasury Department has said it is taking "extraordinary actions" to juggle accounts to avoid breaching the cap. But a June 26 sale of two-year notes, an important source of funds for an anticipated $30 billion July payout to retirees, could be delayed or canceled without the increase, Treasury Secretary Paul O'Neill has said.

By voting on a stand-alone debt bill, the Senate could raise pressure on the House to hold a separate vote on the issue as well. House Democrats, hoping to score election-year points against Republicans, want the House to vote openly on raising the debt ceiling.

Democrats blame last year's tax cuts for turning surpluses into deficits and argue the drop in revenues will hurt efforts to shore up the finances of the Social Security retirement program and Medicare health program for the elderly.

But many House Republicans who have built their careers on championing the need for fiscal restraint have told their leaders they would not openly vote to raise the debt ceiling.


Meanwhile, some senators had hoped to use the debt limit bill to resolve an impasse over establishing a framework for government spending next year.

For the first time since the current budget process was put in place in 1974, Senate Democrats have failed to pass a formal budget plan — something many lawmakers fear will make it much harder to control government spending in fiscal year 2003.

Senate Democrats, and some Republicans, want to set a $768 billion spending cap for next year. The issue could come up in the counterterrorism spending bill.

The House had used its version of the emergency funding bill as a vehicle to set a $759 billion spending limit.



Richard Wolf

Senate OKs raising federal debt limit to about $9 trillion

By Richard Wolf, USA TODAY

The Senate voted Thursday to raise the amount of money the federal government may borrow to almost $9 trillion and later passed a $2.8 trillion budget plan forsaking President Bush's tax cuts and Medicare curbs.

Yearly budget deficits had pushed the nation's debt up to the old limit. Without more borrowing, the government would run short of money to pay its bills and could default on its interest payments. Treasury Secretary John Snow said the action was "critical to provide certainty to financial markets that the integrity of the obligations of the United States will not be compromised."

Q: Was this easy to do?

A: No. Raising the debt ceiling is one of lawmakers' least popular votes, and Democrats made sure Republicans who control Congress did the heavy lifting alone. The Senate approved raising the debt limit by $781 billion on a 52-48 vote. Three of 55 Republicans — Conrad Burns of Montana, Tom Coburn of Oklahoma and John Ensign of Nevada — sided with Democrats against it. Burns and Ensign are up for election in November. The House avoided a separate vote as a result of obscure rules that automatically sent the measure to the Senate as part of last year's budget.

Q: How much is $9 trillion?

A: It's $30,000 for every man, woman and child in the USA. It's more than the gross domestic product of China, the world's second-richest nation. It's more than the combined GDP of Japan and India, the next richest nations. It's roughly equal to the amount of money invested in all of the USA's mutual funds. It's four times larger than the net worth of the nation's 691 billionaires.

Q: How much has the debt limit risen under President Bush?

A: It has increased four times, for a total of about $3 trillion. That's the fastest such rise ever. The last $3 trillion jump took eight years, from $3 trillion in 1989 to $6 trillion in 1997. It took the entire history of the United States through 1989 to amass the first $3 trillion debt.

Q: How big is the debt?

A: The debt is similar to a national mortgage. Economists frequently compare it to the size of the nation's annual economic output, or gross domestic product. By that standard, it's huge. During World War II, when borrowing soared to pay for the fighting, it was bigger than the entire annual economy. It declined to about one-third of GDP in 1981 but rose to two-thirds in the mid-1990s, where it remains today.

Q: What is owed to foreigners?

A: U.S. Treasury obligations are viewed as one of the safest investments in the world. Lured by the stability of the U.S. economy, foreign governments, banks, companies and individuals have sharply increased their U.S. debt holdings. As recently as 1970, foreigners owned only 5% of the debt held by the public — that's the portion of the debt that doesn't include the amount the government owes itself, in the form of IOUs to entities such as the Social Security trust fund. By 2005, foreigners had increased their share to 45%.

Q: Does the debt cost us?

A: The debt costs the government money every year in the form of interest payments. In 2005, interest on the debt was $184 billion, which made it the fifth biggest item in the federal budget, behind defense, Social Security, Medicare and Medicaid.

Q: Where is the debt headed in the future?

A: Bush's budget projects it will reach $11.5 trillion by 2011. That's equal to 68% of the nation's economy, the largest percentage since 1955.



U.S. debt: $30,000 per American

WASHINGTON (AP) — Like a ticking time bomb, the national debt is an explosion waiting to happen. It's expanding by about $1.4 billion a day — or nearly $1 million a minute.

What's that mean to you?

It means almost $30,000 in debt for each man, woman, child and infant in the United States.

Even if you've escaped the recent housing and credit crunches and are coping with rising fuel prices, you may still be headed for economic misery, along with the rest of the country. That's because the government is fast straining resources needed to meet interest payments on the national debt, which stands at a mind-numbing $9.13 trillion.

And like homeowners who took out adjustable-rate mortgages, the government faces the prospect of seeing this debt — now at relatively low interest rates — rolling over to higher rates, multiplying the financial pain.

So long as somebody is willing to keep loaning the U.S. government money, the debt is largely out of sight, out of mind.

But the interest payments keep compounding, and could in time squeeze out most other government spending — leading to sharply higher taxes or a cut in basic services like Social Security and other government benefit programs. Or all of the above.

A major economic slowdown, as some economists suggest may be looming, could hasten the day of reckoning.

The national debt — the total accumulation of annual budget deficits — is up from $5.7 trillion when President Bush took office in January 2001 and it will top $10 trillion sometime right before or right after he leaves in January 2009.

That's $10,000,000,000,000.00, or one digit more than an odometer-style "national debt clock" near New York's Times Square can handle. When the privately owned automated clock was activated in 1989, the national debt was $2.7 trillion.

It only gets worse.

Over the next 25 years, the number of Americans aged 65 and up is expected to almost double. The work population will shrink and more and more baby boomers will be drawing Social Security and Medicare benefits, putting new demands on the government's resources.

These guaranteed retirement and health benefit programs now make up the largest component of federal spending. Defense is next. And moving up fast in third place is interest on the national debt, which totaled $430 billion last year.

Aggravating the debt picture: the wars in Iraq and Afghanistan, which the non-partisan Congressional Budget Office estimates could cost $2.4 trillion over the next decade

Despite vows in both parties to restrain federal spending, the national debt as a percentage of the U.S. Gross Domestic Product has grown from about 35% in 1975 to around 65% today. By historical standards, it's not proportionately as high as during World War II — when it briefly rose to 120% of GDP, but it's a big chunk of liability.

"The problem is going forward," said David Wyss, chief economist at Standard and Poors, a major credit-rating agency.

"Our estimate is that the national debt will hit 350% of the GDP by 2050 under unchanged policy. Something has to change, because if you look at what's going to happen to expenditures for entitlement programs after us baby boomers start to retire, at the current tax rates, it doesn't work," Wyss said.

With national elections approaching, candidates of both parties are talking about fiscal discipline and reducing the deficit and accusing the other of irresponsible spending. But the national debt itself — a legacy of overspending dating back to the American Revolution — receives only occasional mention.

Who is loaning Washington all this money?

Ordinary investors who buy Treasury bills, notes and U.S. savings bonds, for one. Also it is banks, pension funds, mutual fund companies and state, local and increasingly foreign governments. This accounts for about $5.1 trillion of the total and is called the "publicly held" debt. The remaining $4 trillion is owed to Social Security and other government accounts, according to the Treasury Department, which keeps figures on the national debt down to the penny on its website.

Some economists liken the government's plight to consumers who spent like there was no tomorrow — only to find themselves maxed out on credit cards and having a hard time keeping up with rising interest payments.

"The government is in the same predicament as the average homeowner who took out an adjustable mortgage," said Stanley Collender, a former congressional budget analyst and now managing director at Qorvis Communications, a business consulting firm.

Much of the recent borrowing has been accomplished through the selling of shorter-term Treasury bills. If these loans roll over to higher rates, interest payments on the national debt could soar. Furthermore, the decline of the dollar against other major currencies is making Treasury securities less attractive to foreigners — even if they remain one of the world's safest investments.

For now, large U.S. trade deficits with much of the rest of the world work in favor of continued foreign investment in Treasuries and dollar-denominated securities. After all, the vast sums Americans pay — in dollars — for imported goods has to go somewhere. But that dynamic could change.

"The first day the Chinese or the Japanese or the Saudis say, 'we've bought enough of your paper,' then the debt — whatever level it is at that point — becomes unmanageable," said Collender.

A recent comment by a Chinese lawmaker suggesting the country should buy more euros instead of dollars helped send the Dow Jones plunging more than 300 points.

The dollar is down about 35% since the end of 2001 against a basket of major currencies.

Foreign governments and investors now hold some $2.23 trillion — or about 44% — of all publicly held U.S. debt. That's up 9.5% from a year earlier.

Japan is first with $586 billion, followed by China ($400 billion) and Britain ($244 billion). Saudi Arabia and other oil-exporting countries account for $123 billion, according to the Treasury.

"Borrowing hundreds of billions of dollars from China and OPEC puts not only our future economy, but also our national security, at risk. It is critical that we ensure that countries that control our debt do not control our future," said Sen. George Voinovich of Ohio, a Republican budget hawk.

Of all federal budget categories, interest on the national debt is the one the president and Congress have the least control over. Cutting payments would amount to default, something Washington has never done.

Congress must from time to time raise the debt limit — sort of like a credit card maximum — or the government would be unable to borrow any further to keep it operating and to pay additional debt obligations.

The Democratic-led Congress recently did just that, raising the ceiling to $9.82 trillion as the former $8.97 trillion maximum was about to be exceeded. It was the fifth debt-ceiling increase since Bush became president in 2001.

Democrats are blaming the runup in deficit spending on Bush and his Republican allies who controlled Congress for the first six years of his presidency. They criticize him for resisting improvements in health care, education and other vital areas while seeking nearly $200 billion in new Iraq and Afghanistan war spending.

"We pay in interest four times more than we spend on education and four times what it will cost to cover 10 million children with health insurance for five years," said House Speaker Nancy Pelosi, D-Calif. "That's fiscal irresponsibility."

Republicans insist congressional Democrats are the irresponsible ones. Bush has reinforced his call for deficit reduction with vetoes and veto threats and cites a looming "train wreck" if entitlement programs are not reined in.

Yet his efforts two years ago to overhaul Social Security had little support, even among fellow Republicans.

The deficit only reflects the gap between government spending and tax revenues for one year. Not exactly how a family or a business keeps its books.

Even during the four most recent years when there was a budget surplus, 1998-2001, the national debt ranged between $5.5 trillion and $5.8 trillion.

As in trying to pay off a large credit-card balance by only making minimum payments, the overall debt might be next to impossible to chisel down appreciably, regardless of who is in the White House or which party controls Congress, without major spending cuts, tax increases or both.

"The basic facts are a matter of arithmetic, not ideology," said Robert L. Bixby, executive director of the Concord Coalition, a bipartisan group that advocates eliminating federal deficits.

There's little dispute that current fiscal policies are unsustainable, he said. "Yet too few of our elected leaders in Washington are willing to acknowledge the seriousness of the long-term fiscal problem and even fewer are willing to put it on the political agenda."

Polls show people don't like the idea of saddling future generations with debt, but proposing to pay down the national debt itself doesn't move the needle much.

"People have a tendency to put some of these longer term problems out of their minds because they're so pressed with more imminent worries, such as wages and jobs and income inequality," said pollster Andrew Kohut of the non-partisan Pew Research Center.

Texas billionaire Ross Perot made paying down the national debt a central element of his quixotic third-party presidential bid in 1992. The national debt then stood at $4 trillion and Perot displayed charts showing it would soar to $8 trillion by 2007 if left unchecked. He was about a trillion low.

Not long ago, it actually looked like the national debt could be paid off — in full. In the late 1990s, the bipartisan Congressional Budget Office projected a surplus of a $5.6 trillion over ten years — and calculated the debt would be paid off as early as 2006.

Former Fed chairman Alan Greenspan recently wrote that he was "stunned" and even troubled by such a prospect. Among other things, he worried about where the government would park its surplus if Treasury bonds went out of existence because they were no longer needed.

Not to worry. That surplus quickly evaporated.

Mark Zandi, chief economist at Moody's Economy.com, said he's more concerned that interest on the national debt will become unsustainable than he is that foreign countries will dump their dollar holdings — something that would undermine the value of their own vast holdings. "We're going to have to shell out a lot of resources to make those interest payments. There's a very strong argument as to why it's vital that we address our budget issues before they get measurably worse," Zandi said.

"Of course, that's not going to happen until after the next president is in the White House," he added.

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Lieberman Walks to Senate to Overcome GOP Filibuster on $1.1 Trillion Spending Bill


Senators narrowly voted Saturday to cut off debate on an omnibus spending bill with $447 billion in discretionary spending.

The final vote will come Sunday afternoon.

The $1.1 trillion measure will essentially keep the government running but includes budget boosts to the Education Department, the State Department, the Department of Health and Human Services, and others.

It bundles six of the 12 annual spending bills -- cutting off a lengthy appropriations process -- and combines $650 billion in government spending for programs such as Medicare and Medicaid with $447 billion in discretionary government operating budgets.

The measure boosts spending on oversight of financial markets, high-speed rail, small business lending programs and needle-exchange programs.

But included in the measure are more than 5,000 earmarks sought by Democrats and Republicans.

Sen. John McCain, R-Ariz., blasted the "pork" in the measure, reading into the congressional record an ABC News.com story that highlights the back-home spending projects.

Other Republicans argued the bill spends too much at a time when Americans are feeling the economic crunch.

"Obviously we need to run the government, but do you suppose the government could be a little bit like families and be just a little bit prudent in how much it spends?" said Sen. Jon Kyl, R-Ariz.

Democratic leaders had to keep the vote open for more than an hour to reach the 60 votes.

The last "aye" came from Sen. Joe Lieberman, the Connecticut Independent, who is Jewish and does not use automobiles on Saturday for religious reasons.

Lieberman could be seen on the Senate floor in his long coat and scarf, after walking to work.

The senator lives nearly five miles from the Senate and temperatures were near freezing in Washington this morning.

At a news conference Saturday Sen. Judd Gregg, R-N.H., likened lawmakers -- who will have to vote to raise the debt ceiling above $13 trillion later this month -- as being "like drunken sailors saying they don't want the bar to ever close."

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