NEW YORK (CNNMoney.com) -- With the federal government inching close to the debt ceiling, the Senate on Thursday passed a $290 billion increase to the amount of debt the Treasury is allowed to have.
The 60-39 vote follows House approval earlier this month of the same measure. President Obama is expected to sign the bill soon.
The new law raises the debt ceiling to $12.394 trillion from $12.104 trillion.
As of Tuesday, the amount of debt subject to the limit on Treasury's books was $12.04 trillion, just $64 billion below the limit.
The increase is estimated to cover Treasury's borrowing needs through mid-February.
If the Senate hadn't raised the debt ceiling before Dec. 31, the Treasury would likely have had to employ extraordinary measures to keep the debt below the ceiling to stave off default.
Default would unleash a chain of events that could devalue U.S. bonds and seriously harm the nation's reputation with creditors around the world. In short, it's not something lawmakers can afford to let happen.
Treasury has taken extraordinary measures in the past - sometimes for months at a time - whenever Congress let the vote on the debt limit go down to the wire.
But a congressional leadership aide and a Treasury spokesman both told CNNMoney that the agency wouldn't have the resources to keep the store open for nearly as long given the magnitude of the government's record borrowing needs.
"The tools haven't grown as the deficit has grown," the Treasury spokesman said.
How much has the deficit grown? Economist Diane Rogers offers some perspective.
"It tells us a lot about how dramatically the near-term budget outlook has changed, when $300 billion buys you only two months' time," Rogers wrote recently in her blog EconomistMom.com. By comparison, she noted, "the average annual budget deficit over the past 7 years has been $304 billion."
The Democratic leadership would have preferred to pass a large increase to the debt ceiling to carry Treasury through all of next year rather than having to have another vote on the issue before the mid-term elections in November. Indeed, House leaders were originally considering an increase of approximately $1.8 trillion.
But they settled on a much shorter-term increase because of pressure brought by a group of fiscal hawks in both the House and the Senate. They have threatened to vote against any long-term debt ceiling increase unless they get commitments to increase fiscal responsibility from the leadership.
House and Senate leaders couldn't ignore the fiscal hawks, since they need every vote they could get.
"It's all on the shoulders of leadership. They're responsible for making sure we don't default," said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group.
For the fiscal hawks, a shorter-term increase buys them time to negotiate further with the leadership to address their demands, which differ somewhat in the House and the Senate.
Fiscally conservative Democrats in the House, known as the Blue Dogs, have said they would vote against a big increase in the ceiling unless the legislation re-enacts so-called pay-go rules, which require lawmakers to find ways in the budget to pay for new spending proposals or tax cuts.
But the pay-go proposal would exempt about $3 trillion worth of policies that are likely to be extended, including the Bush tax cuts for the majority of Americans.
That's why the House version of pay-go may be a no-go in the Senate. Senate Budget Chairman Kent Conrad, D-N.D., has said he supports pay-go but not if it exempts pricey policies.
Meanwhile, 13 Senate Democrats say they won't vote for a large debt ceiling increase unless the leadership commits to a "credible process" for reining in the country's debt.
The senators' proposal, similar to one in the House, is to create a bipartisan fiscal commission charged with making recommendations to Congress for reining in runaway spending growth that threatens to overwhelm the federal budget. Lawmakers would be required to vote up or down on the recommendations but would not be allowed to amend or filibuster them.
Documents obtained by CNN show that top advisers to the president have been privately weighing various versions of a commission, though it would be created by a presidential executive order and thus could not mandate that Congress vote up or down on its recommendations.
Reining in the nation's debt has come to the fore this year, because the economic crisis accelerated the timetable that lawmakers have to deal with long-term fiscal problems, and as lawmakers of both parties consider expensive proposals going forward.