WASHINGTON -- The Senate voted against the Tea Party-back "cut, cap and balance" plan produced by the House.
Earlier, Senate Majority Leader Harry Reid had promised to reject the bill.
The Nevada Democrat said the Tea Party-backed measure, passed earlier this week by the House, is one of the worst pieces of legislation in U.S. history.
But the GOP said their balanced budget plan is the best way to prevent a future debt fiasco.
In a scene Thursday rarely witnessed in Congress, House Republicans crossed the dividing lines of Capitol Hill to stand shoulder-to-shoulder with their GOP colleagues in the Senate to demand an up or down vote on "Cut, Cap, and Balance."
"If anybody listened to the campaign and expected less than what you see with 'cut, cap and balance,' you weren't listening," Sen. Lindsey Graham, R-S.C., said.
GOP lawmakers rejected the idea of a short-term debt deal in exchange for a package of proposed spending cuts, making note of Congress' poor track record.
"This is not your family making a promise," Rep. Jim Jordan, R-Ohio, said. "This is not a trusted friend making a promise to you; this is not your priest, your pastor, your rabbi making a promise to you. This is Congress making a promise."
"This thing is not going to fly with the American people. It's certainly not going to fly with folks in the House," he charged.
One of the key components of the GOP plan centers on a balanced budget amendment.
Attempts for the United States to only spend what it takes in goes back to the founding fathers.
"It's taken 200 years since Thomas Jefferson first proposed it to bring it up this time," Rep. Bob Goodlatte, R-Va., said.
Goodlatte, who sponsored the latest balanced budget effort, believes the only way to hold Congress accountable for its spending habits, is to make the law part of the Constitution.
"We're on the edge of a rocky coast right now," he warned. "If we don't pull back, we're going to crash and destroy this great country."
The public appears to agree, with all the states except Vermont having some type of rule requiring a balanced budget.
But so far, the measure has never made it past Congress, much less to the states for ratification.
The White House obviously doesn't want it and Hill Democrats argue the Republican plan will hurt Medicare and Social Security.
"We don't need a constitutional amendment to do our jobs," President Obama insisted. "The Constitution already tells us to do our jobs."
Freshman lawmakers backed by the Tea Party, however, see a balanced budget amendment as a positive sign to voters who gave the GOP new clout in 2010.
Freshman Sen. Mike Lee, R-Utah, told CBN News that a constitutional amendment is more than just an effort to help Washington manage money.
"It's not just our fiscal stability - our economic health - that's at stake," he said. "It's our freedom because we all know, as God-fearing Americans, that every time government acts, it does so at the expense of our individual liberty."