[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2010/images/02/12/art.obama.gi.jpg caption="President Barack Obama signed into law Friday a record $1.9 trillion increase in the government's borrowing cap."]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