Senate set to vote on pay-go bill to clear way for debate over debt

Senators will vote on a pay-as-you-go measure this week as they move to address the country's growing $12.3 trillion debt.

Senate Majority Leader Harry Reid (D-Nev.) will bring pay-go to the floor as an amendment to a bill seeking to increase the federal debt ceiling, part of a deal made with House Speaker Nancy Pelosi (D-Calif.) in a broader debate over the federal debt.

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Pay-go requires mandatory spending increases to be offset with spending cuts elsewhere or tax hikes. Reid's office said the language is still being worked out.

The Senate debate on the debt-limit increase will begin Wednesday.

The debt-limit increase and pay-go are pieces of a bigger fiscal reform puzzle.

The Senate must increase the $12.4 trillion debt limit by mid-February to allow the federal government to continue borrowing money and avoid default. But fiscally conservative Senate Democrats, led by Budget Committee Chairman Kent Conrad (N.D.) and Evan Bayh (Ind.), have said the creation of a bipartisan commission to produce a fiscal reform package is key to their support for the debt-ceiling increase.

Pelosi has been reluctant to accept a commission, fearing that it could take power away from her committee chairmen. She has pressed the Senate to first pass a pay-go bill, already approved in the House, before the House will consider the fiscal commission.

House Democrats welcomed news of an upcoming pay-go vote in the upper chamber.

"The Senate vote on pay-go may not get the commission enacted, but it may get debt limit enacted, which is the first step," said Peter Boogard, a spokesman for Rep. Jim Cooper (D-Tenn.). Cooper, a Blue Dog Democrat, sponsored the House pay-go bill and is pushing a commission similar to Conrad's.

House Majority Leader Steny Hoyer (D-Md.) said Friday on CNBC that he's "hopeful" Congress can adopt both the commission and the pay-go bill while it also deals with the debt limit.

"We need to put this country on a road to fiscal balance," Hoyer said.

While Democrats in both chambers instituted pay-go rules in 2007, lawmakers have ignored them when taking up costly legislation. The Democrat-controlled Congress waived the pay-go rules to pass a $288 billion farm bill in 2008 and to pass the $787 billion stimulus in 2009.

A pay-go law, which was stronger and harder to waive than the current rules, was in place during the Clinton administration, but Republicans in Congress and the George W. Bush administration allowed it to expire in 2002. The next year, Republicans pushed through a package of tax cuts and the Medicare drug benefit without paying for them.

The Obama administration, which backs statutory pay-go, is becoming increasingly involved in talks over the debt commission.

Hoyer said the commission came up during House-Senate healthcare negotiations at the White House last week led by President Barack Obama. Vice President Joe Biden has been leading talks last week between fiscal commission proponents and Democratic congressional leaders to try to hash out an agreement, House Budget Committee Chairman John Spratt (D-S.C.) told reporters Friday.

It's unclear whether the commission and pay-go have the support in Congress needed to pass. Sen. Judd Gregg (R-N.H.), a co-sponsor of the Conrad bill, has said the commission proposal lacks the necessary 60 Senate votes.

The AARP is calling on senators to stop both proposals. The group's CEO, A. Barry Rand, penned a letter to senators saying the country's debt problems should be solved through regular order instead of through a special commission. In opposing statutory pay-go, Rand said lawmakers should look at new tax revenues, instead of just the cost of entitlements. The pay-go bill proposes forcing offsets of new spending through cuts of entitlement programs, including Medicare.

"We are committed to supporting balanced policies that address the nation's long-term fiscal challenges while also honoring the contributions of our members and the needs of millions of other Americans who rely on Medicare, Medicaid and Social Security," Rand wrote.