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Default averted, battles loom

After Senate OK’s bill, focus shifts to new deficit panel

By Matt Viser
Globe Staff / August 3, 2011

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WASHINGTON - The Senate approved a sweeping package yesterday that allowed the United States to begin borrowing more money, and President Obama signed the legislation just hours before the country would have faced default on its obligations.

Following an extraordinary, bruising political battle in which neither side emerged unscathed, the Senate approved the measure by an overwhelming 74-to-26 margin. Although the bill enabled the government to continue paying its bills, many questions remained about how the legislation will lower the deficit.

A 12-member joint congressional committee will be formed over the next two weeks to find up to another $1.5 trillion in savings. A key question is whether the committee, which must make its recommendations by Thanksgiving, will address increased tax revenue - something Democrats say is imperative but Republicans have opposed.

“We’ll need a balanced approach where everything is on the table,’’ Obama said in the White House Rose Garden just after the Senate vote. “Yes, that means making some adjustments to protect health care programs like Medicare so they’re there for future generations. It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share.’’

There was a temporary reprieve yesterday from the high-pitched partisan bickering - as lawmakers congratulated one another on the Senate floor for coming to an agreement that both sides disliked but could live with - but they also began to preview future battles. The new committee will have to grapple with the hard choices for both parties. Democrats are opposed to deep cuts in entitlement programs, such as Medicare or Social Security, while Republicans are stridently against raising taxes.

Each party will get six members on the committee - three from the House, and three from the Senate. Party leaders have two weeks to make those appointments.

Senate majority leader Harry Reid immediately dismissed Republican suggestions that the committee automatically reject the idea of raising revenue as part of its plan.

“That’s not going to happen,’’ Reid said.

On a day when the Dow dropped 266 points, Democrats also sought to shift the focus to the economy, saying they intend to place new emphasis on job creation in the coming weeks.

“Jobs, jobs, job, jobs, jobs,’’ House minority leader Nancy Pelosi said at a press conference yesterday. “You cannot say it enough.’’

Obama also called for action to stimulate the economy, advocating an extension of the payroll-tax cut for workers, longer unemployment benefits, and an infrastructure bank.

Although the compromise debt ceiling legislation had been expected to win approval in yesterday’s Senate vote, both sides stood to hail its passage.

Both senators from Massachusetts - John Kerry, a Democrat, and Scott Brown, a Republican - voted in favor of the legislation.

“There’s a little bit in there for everyone to like, and a little bit in there for people not to like,’’ Brown said. “We didn’t raise taxes, we stepped back from default, we made real cuts.’’

Kerry said in a conference call following the vote that a portion of House Republicans held a “completely unreasonable, ideologically rigid, extreme point of view’’ and that he thinks it will define the entire election through 2012.

“I voted not for the deal,’’ Kerry said. “I voted to avoid default. I voted to prove we can get a tough thing done even though I don’t like components of the deal. The real fight lies in the months ahead.’’

Senator Kelly Ayotte, a New Hampshire Republican, was among those who voted against the bill, saying it didn’t do enough to slice government spending.

“We must save our country for the sake of our children,’’ she said in a floor speech before the vote. “I am the mother of a 6-year-old and a 3-year-old. . . . I know I will not look my children in the eye and have them say, ‘Mom, what did you do about it?’ ’’

The legislation had been approved by the House on Monday night by a 269-to-161 vote. It passed with the support of 174 Republicans and 95 Democrats. Only three of the 10 Massachusetts House Democrats voted in favor of the plan, Representatives William Keating of Quincy, Stephen Lynch of South Boston, and Niki Tsongas of Lowell.

The deal allows the country’s borrowing limit to increase by at least $2 trillion, preventing the looming cash shortage, and will cover spending demands until 2013. It also cuts spending by $1 trillion, spread over the next 10 years, and establishes a process to identify another $1.5 trillion in cuts to the deficit.

The bipartisan congressional committee must identify reductions in the deficit by late November. Those cuts could come through new revenues by overhauling the tax code, or through cuts to entitlement programs such as Medicare, Medicaid, and Social Security. If the committee is deadlocked, or if Congress doesn’t pass the panel’s recommendations, it would automatically trigger a set of cuts.

Those cuts would be spread evenly between defense spending and domestic programs. They would hit payments to Medicare providers, but not to Medicare beneficiaries.

There were few signs yesterday of who would be named to serve on the committee.

“I’m not that much of a glutton for punishment,’’ said Senator Jon Kyl, an Arizona Republican who declined to say whether he wanted to be on the committee. “I mean, this is going to take an odd type of person to serve on this committee.’’

One approach could be to name the senators who were in the so-called Gang of Six, a bipartisan group that had worked on a deficit-reduction proposal that briefly gained steam.

Senate minority leader Mitch McConnell said yesterday that he would appoint his three members “very soon.’’ His appointees would be unlikely to vote for any proposal that would raise taxes.

Pelosi, who also gets to appoint three members, declined to talk about whom she’ll appoint but stressed that revenues would have to be a component.

“We’re fooling ourselves if we ever think that one element on the table . . . is going to solve this,’’ she said. “If we’re serious about reducing the deficit, we have to go in there recognizing that some cuts will have to be made [but also] that we can’t accomplish what we set out to do without considering revenue in a very strong way.’’

Theo Emery and Tracy Jan of the Globe staff contributed to this report. Matt Viser can be reached at maviser@globe.com.

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