Senate OKs $9 Trillion Debt Limit

Increase Of $781Billion Averts Default On U.S. Treasury Notes

(CBS/AP)  The Senate voted Thursday to allow the national debt to swell to nearly $9 trillion, preventing a first-ever default on U.S. Treasury notes.

The bill passed by a 52-48 vote. The increase to $9 trillion represents about $30,000 for every man, woman and child in the United States. The bill now goes to President Bush for his signature.

Republican leaders put off this vote as long as they could, CBS News correspondent Bob Fuss reports. The federal government is about a week away from being unable to pay its bills – literally. Waiting for Congress, the treasury has been moving money around, even borrowing from federal worker's retirement funds.

It's an embarrassing vote for Republicans, since they control the decisions on taxes and spending that led to all this debt. But it also had to be done so the government could go out and borrow more money to pay its bills.

The measure allows the government to pay for the war in Iraq and finance Medicare and other big federal programs without raising taxes. It passed hours before the House was expected to approve another $91 billion to fund the war in Iraq and provide more aid to hurricane victims.

The partisan vote also came as the Senate continued debate on a $2.8 trillion budget blueprint for the upcoming fiscal year that would produce a $359 billion deficit for the fiscal year beginning Oct. 1.

The debt limit will increase by $781 billion. It's the fourth such move — increasing the debt limit by a total of $3 trillion — since Mr. Bush took office five years ago.

The vote came a day after Treasury Secretary John Snow warned lawmakers that action was "critical to provide certainty to financial markets that the integrity of the obligations of the United States will not be compromised."

On Thursday, Treasury postponed next week's auction of three-month and six-month bills pending Senate action, though the move was likely to be quickly reversed given the Senate's vote.

The present limit on the debt is $8.2 trillion. With the budget deficit expected to approach $400 billion for both this year and next, another increase in the debt limit will almost certainly be required next year.