(CNNMoney.com) - The Senate on Thursday raised the cap on how much the government can borrow to a record level.
Getting just enough votes to pass, the Senate voted 60-39 to increase the debt limit to $1.9 trillion. That would push the ceiling to $14.294 trillion from the current $12.394 trillion. Sixty votes were required for passage.
But it's not a done deal. The bill now needs to be sent back to the House for a vote, where passage is still in question, according to Congressional Quarterly.
A $1.9 trillion increase is expected to cover the Treasury's projected borrowing needs through at least early 2011, and in any case well past the November mid-term elections. Debt limit votes are always politically difficult and not ones lawmakers seeking re-election like to take.
The ceiling reflects the level up to which the Treasury Department is allowed to borrow. If the ceiling is ever breached, the country would effectively be in default. That can hurt bonds, the dollar and creditors' portfolios.
The Senate legislation also included an amendment that seeks to rein in the growth rate in U.S. debt by putting in place statutory pay-go rules.
A pay-go law would require lawmakers to find ways to pay for proposed tax cuts or spending increases by raising taxes or reducing spending elsewhere in the budget.
Pay-go rules don't actually reduce the debt load already accrued, but they put the brake on future increases - a helpful first step, budget experts say.
The effectiveness of pay-go rules, however, depends on their parameters. The strongest form would not allow any policy to be exempt.
The amendment passed by the Senate, however, exempts some expensive measures, such as the cost of a permanent extension of middle class tax cuts.
It would also exempt the Medicare "doctor fix" for 5 years and the extensions of relief from the Alternative Minimum Tax and the estate tax for two years.
The passage of the debt limit increase had been called into question for weeks as a group of a dozen-plus moderate Democrats, including Senate Budget Chairman Kent Conrad, D-N.D., threatened to vote against any large increase until a credible process to address future deficits was put in place.
A proposal cosponsored by Conrad and Sen. Judd Gregg, R-N.H., the budget committee's top-ranking Republican would have created a statutory bipartisan fiscal commission to come up with recommendations for tax increases and spending cuts
Had it passed, Congress would have been required to vote on the commission's recommendations by the end of this year.
President Obama during his State of the Union address on Wednesday said he would create a bipartisan fiscal commission by executive order.
Obama's panel is a weaker version of a commission because Congress won't be required by law to consider the presidential commission's recommendations or to vote on them.
Conrad and several of the moderate Democrats who had been resisting the increase earlier ended up voting for it on Thursday.
Conrad said he got written assurances that Reid and House Speaker Nancy Pelosi, D-Calif., would bring the presidential commission's recommendations to a vote before the end of the year.