Washington: US President Barack Obama signed a bill into law that raises the federal debt limit by $1.9 trillion (Dh6.97 trillion) to $14.3 trillion and places new curbs on spending in an attempt to prevent this year's record deficit from getting worse.

The increase in the debt limit was required to prevent the government from defaulting on its bills. The increase is more than twice the size of any of the four previous debt increases lawmakers approved in the past two years.

The new debt limit will hold until sometime early next year, long enough to shield lawmakers from having to raise it again before November's congressional elections.

A spokesman for House Republican Leader John Boehner of Ohio criticised Obama for signing the bill with no public ceremony.

"Why did President Obama choose to sign the largest increase in the debt limit in history behind closed doors?" said Michael Steel, the spokesman. "Perhaps because he just proposed a budget with deficits that his own administration officials define as ‘unsustainable'."

The deficit is projected to hit a record $1.6 trillion this year, or 10.6 per cent of the economy.

Limiting expenditure

The debt limit bill also enacts into law pay-as-you go budgeting rules intended to make it harder for lawmakers to add to the deficit. Obama has praised that feature of the bill as a step toward reining in spending and reduce what he on February 1 called "a decade of profligacy".

Obama announced a 2011 budget request on February 1 that projected the government would run $8.5 trillion in deficits over the next 10 years.

Lawmakers of both parties criticised his budget plan, saying it wouldn't do enough to control the shortfalls. Moody's Investors Service said it may cut the government's bond rating in the next decade if the financial outlook doesn't improve.

Pay-as-you-go, or paygo, requires lawmakers to fin-ance new federal benefit programmes and tax cuts with savings or revenue increases elsewhere in the budget.

"Paygo can't get us out of our fiscal hole but it can keep us from digging it any further," House Democratic Leader Steny Hoyer of Maryland said during debate on February 4.

Republicans said it would have limited impact and would do little to reduce the deficit. They said about 40 per cent of the budget was exempt from the rules. The rules also make it difficult to cut taxes.

Representative Paul Ryan of Wisconsin, the top Republican on the Budget Committee, called the exemptions a "fiscal charade" that allowed lawmakers to "talk tough in the election about how we did this and that, while we bequeathed the next generation an inferior standard of living".

Exemptions

Democrats exempted several costly proposals from the pay-as-you-go rules, including extensions of some of former president George W. Bush's tax cuts, preventing scheduled cuts in Medicare reimbursements to doctors or cutting the estate tax.

The rules also wouldn't affect legislation preventing more taxpayers from having to pay the alternative minimum tax, which isn't indexed for inflation.

Still, the rules may make it harder for lawmakers to enact other items on Obama's agenda, such as his proposal to extend the ‘Making Work Pay' tax credit offering $400 to individuals and $800 to couples.

$1.9tr increase in federal debt limit

$1.6tr projected US budget deficit this year

$8.5tr projected budget deficits over 10 years