House Soundly Rejects Increase in Debt Ceiling

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House Soundly Rejects Increase in Debt Ceiling

By JANET HOOK And MATT PHILLIPS

The House on Tuesday soundly rejected a bill to increase the federal borrowing limit by $2.4 trillion—a symbolic vote that House GOP leaders said demonstrated that Congress will not increase the debt ceiling unless it is linked to a deficit-reduction plan.

The vote was 318-97. All Republicans who voted and 82 Democrats opposed the bill. Seven Democrats voted "present.''

Democratic critics called the vote risky political theatre, but Republicans were betting that financial markets would not be rattled by the measure's all-but-certain defeat in an early evening roll call vote.

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"Today, we are making clear that Republicans will not accept an increase in our nation's debt limit without substantial spending cuts and real budgetary reforms,'' said Rep. David Camp (R., Mich.), chairman of the House Ways and Means Committee, during debate on the bill.

Mr. Camp had been in touch with financial industry leaders in advance of the vote to make sure they ``understood the purpose of this vote,'' an aide said.

Democrats said it was a political stunt for Republicans to move forward on a bill that they wanted to be defeated. ``Bringing up this bill in this fashion is a ploy so egregious that the Republicans have had to spend the last week pleading with Wall Street not to take it seriously,'' said Rep. Sander Levin (D., Mich.).

The vote is just one step in maneuvering between the two parties over the debt limit. It comes as a bipartisan group of congressional leaders is working with the White House on a deficit-reduction package, and two months before the deadline when the Treasury Department said the government risks defaulting on its obligations.

The bond market Tuesday betrayed little sign of worry over the debt limit. The 10-year Treasury note extended its almost two-month climb on Tuesday, with the yield—which moves in the opposite direction of price—falling to 3.05%. That's down from 3.57% in early April.

But in the relatively thinly traded market for credit default swaps—financial products that work like insurance against a bond default—prices for one-year default protection on U.S. debt have been rising faster than longer-term CDS contracts. That suggests that some have bought some protection, or are making speculative bets, on the outside chance of a technical default.

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