Washington (CNN) - President Barack Obama signed into law Friday a record $1.9 trillion increase in the government's borrowing cap.
The legislation, which passed Congress largely along party lines, raises the debt ceiling to $14.294 trillion.
The measure also enacts a statutory pay as you go, or "pay-go," procedure requiring lawmakers to find ways to pay for proposed spending increases or tax cuts by offsetting them with higher taxes or reduced spending elsewhere in the budget.
The debt limit hike is expected to cover the Treasury's borrowing needs past the November mid-term elections and into 2011.
If the debt ceiling were ever breached, the country would effectively be in default. That would slam bonds, the dollar and creditors' portfolios.
Last week, Obama called the bill necessary to "help usher out an era of irresponsibility and begin putting the country back on a fiscally sustainable path."
Pay-go doesn't reduce the debt already accrued, but it would put the brake on future increases - a helpful first step, budget experts say.
The effectiveness of pay-go, however, depends on its parameters. The strongest form would not allow any policy to be exempt.
However, the pay-go measure now signed into law exempts some expensive measures, such as the cost of a permanent extension of middle class tax cuts.
It also would exempt the Medicare "doctor fix" for five years and the extensions of relief from the alternative minimum tax and the estate tax for two years.
Supporters of pay-go often credit the policy with helping the Clinton administration create an annual budget surplus after combating the country's annual deficits in the 1990s. But the pay-go law in place at the time did not exempt any expensive policies, said budget expert Charles Konigsberg, author of the book "America's Priorities."
–CNN's Jeanne Sahadi, Alan Silverleib, and Deirdre Walsh contributed to this report
Pay-Go worked under the Clinton administration. It won't get us completely out of the mess we are in, but it's clearly a message to Congress ot start living within their means. I mean seriously. Republicans must think the American people are stupid to think that the days of the "blank check" are still here. Get it out of your heads. Those days are over.
Perhaps their scared that raising taxes will tank what's left of the economy. The only way out is going to be to cut all that spending over the past year. You don't buy what you can't pay for. Have we learned nothing over the past 2 years?
Is he still 'agnostic' about raising taxes on those of us making under $250,000?
I know I'm speaking into a black hole here, but can't seem to stop myself.
Enacting pay-go (finally) is realy the most important part of this bill. This is something that should have been done years ago – say, when we had a suprlus – but wasn't. Not raising the debt limit and defaulting would be be the equivalent of economic suicide. (See: Argentina 2001)
Obama is not the first president since 2000 to raise the debt limit. I could be off on this, however, I believe Bush did so at least 3 or 4 times. But then, that was back when when deficits didn't matter. At least according to VP Cheney.
BTW, just to cut short the usual stuff: I have a masters degree, am in the top tax bracket, have worked since age 16, and have never been on government assistance.
and we will need trillions of dollars if we are going to "change" America.
Len in Washington February 12th, 2010 12:07 pm ET
I have to say that I agree with you fully on your statement about who's to blame about the state of our economy; I hate to be penurious, but we are to blame for the mess we are currenly in at this moment. We wanted the latest TV, Cell Phone, or car; even though there were some individuals who could not afford to buy items like that, they still risked themselves into serious debt into doing so, knowing the potential consequences for those actions. Now, it looks like, unfortunately, I and the rest of my generation will have to pay for those mistakes that you committed; I know what's comming, and I know it won't be a beauteous experience when my generation has to pay off the debt due to decades of irresponsibility. Enough complaining on my part; I have a suggestion of how we can get out of this mess we are in; think in logical terms and in a broad sense perspective on the issues we are going to face in the future and the issues that are occuring right now; economically, scientifically, politically, psychologically, historically, legally, cultural, mythologically, and in a principled/ privy sense of perspective. We need to follow all of those perspectives in every issue we face; healthcare reform, the national debt, the tax system, financial regulation, climate change, clean energy independence, and every other issue facing us in a interpersonal way and in a intrapersonal way. Thank you, and have a great night.
I wonder if the hard-earned money that I am paying in income taxes is going toward the welfare checks that the frequent posters to these forums must be collecting. I cannot see how they would have time to actually work for a living when they seem to be spending the entire day blogging.
I love how these newly minted deficit hawks never complained during the eight years that a 160 billion surplus was turned into a 1.2 trillion deficit.
So it's "pay go" for anything the Adminstration doesn't support but their entitlement increases are exempt. It's just like the spending freeze that isn't.
Icant wait for election day ,I hope to see Nancy Pelosi crying in Obama's arms.
Wish he would take up the luge and leave this country alone. Go with aunt toto back to kenya where you belong.
Yeah, that's right, borrow another $1.9 trillion from the Chinese.
If we're going to blame Bush for the Obama administration economy, why don't we just keep going, maybe it was Clinton's fault. Or or or...maybe it was Bush seniors fault? Why don't we all just blame everybody else so that WE don't have to do anything?! Obama is spending all of our money and our grandchildren's money on bailing out millionaires and paying for the education and healthcare for ILLEGAL immigrants. What will happen when the middle class can no longer bear the burden for the wealthy and the ones that just take-take-take without paying taxes (illegals)? We will be America...the new third world country.
I didn't vote for him. Can't wait for this to stop.
i'm going to go out and buy a $4million home, not pay for it, and then take out a line of credit for another $5 million for an addition and not pay for that either. The banks will be owned by Barney Frank of course, so I know I can get the money and credit.
Then when the bank comes a knockin when I haven't paid, I'll say "Wait...you can't do anything. I raised my own debt limit, and instituted my own pay-go. I'm going to start charging people to come over and throw cream pises at Nancy Pelosi's Jack Nicholson's Joker-like face! I should have your money back to you in no time!! "
Are we doomed to repeat history. The Weimar Republic spent itself into non-existence, so did the USSR I am afraid we are next......
This is the most fiscally irresponsible administration America has ever had. They have put generations of Americans into historic debt and we have very little to show for it. They have redefined failure in so many ways.
As he was signing, he stated that George Soros and the unions told him to raise it some more, they haven't stolen enough from the taxpayers yet. What an incompetent idiot. The worst president we have ever had, supported by elitiests all over the world. Stupid liberals.
Stupid is as Stupid does
Steal, steal and steal from the working people. Until Obummie can contribute to this country, we shouldn't.
financial collapse is the key to revolution.....
and the hole just gets even deeper. i'd hate to see the day when the youth of today figure out that they will be the ones responsible for this debt, which in turn will severely affect their ability to have a higher standard of living. the actions of our political leaders can be compared to parents taking out loans in the name of their children. the country needs to get back to the idea that it needs to be able to pay for things rather than simply continuing to max out our national credit card.
hooray for President Obama as he is cleaning up the mess left to him which if he didn't become President the idiot republicans would have caused this country to go into an depression which there is no telling when we would have recovered. Hooray for President Obama and down with all idiot republicans and their supporters they are idiots also. You know it!
Budgets do not come from the White House. They come from Congress, and the party that controlled Congress since January 2007 is the Democratic Party. They controlled the budget process for FY 2008 and FY 2009, as well as FY 2010 and FY 2011. In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases. For FY 2009, though, Nancy Pelosi and Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the FY 2009 budgets.
And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete FY 2009.
If the Democrats inherited any deficit, it was the FY 2007 deficit, the last of the Republican budgets. That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets. If Obama inherited anything, he inherited it from himself.
In a nutshell, what Obama is saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th.
Don't for a minute be fooled into thinking he is done yet. He has three more years. Expect probably 2 more debt level increases. They are probably already working on justification and planning for the next one.