WASHINGTON — The Senate Thursday approved legislation to raise the debt limit to $14.3 trillion and ensure the Treasury Department will be able to keep open into 2011 its window for state and local government series securities, which municipal issuers purchase for refunding escrows to avoid earning arbitrage.
Senators voted 60 to 39 to increase the national debt limit by $1.9 trillion after they added a pay-as-you-go amendment that will ensure spending increases are offset to ensure budget neutrality. The vote fell exclusively down party lines, with the Democrats prevailing.
The legislation now advances to the House.
If agreed to by the House, the legislation will ensure that municipal issuers will not find the so-called SLGS window slammed in their faces. Whenever the Treasury bumps against the statutory limit, one of its first actions is usually to cut off the sale of SLGS.
As of Wednesday, the Treasury had $12.309 trillion of public debt outstanding, according its Bureau of Public Debt.
Congressional Democratic leaders originally hoped to pass a $1.8 trillion or $1.9 trillion increase to the limit in December when Treasury officials were warning that they would hit what was then a $12.1 trillion limit by the end of the month. That increase would have funded government operations through the end of 2010, including through the 2010 midterm congressional elections.
However, that effort met resistance from moderate Democrats in both chambers, who insisted any substantial debt-limit increase be accompanied by the re-establishment of pay-go budgeting rules for future legislation. Instead, with the Dec. 31 deadline fast approaching, lawmakers quickly approved a smaller $290 billion increase, which was expected to tide over the government through the end of February.
