Updated: 4:30 p.m.

Senate Appropriations Chairman Daniel Inouye (D-Hawaii) today reluctantly extended a moratorium on earmarks for another year, shortly before a vote on a permanent ban.

That proposal, offered by Sens. Claire McCaskill (D-Mo.) and Pat Toomey (R-Pa.), failed, 40-59, with both Democrats and Republicans voting against it. The duo had offered the amendment to a Senate measure barring insider trading by Members of Congress.

By an even more lopsided 26-73 vote, the Senate also rejected an amendment by Sen. James Inhofe (R-Okla.) to ban earmarks not authorized by a Congressional committee. Inhofe has been an outspoken proponent of the need to preserve lawmakers’ right to direct spending to their states, and he offered the amendment as a potential compromise.

Even as Inouye extended his own voluntary earmark moratorium, he defended Congress’ power of the purse as vital to the separation of powers in the Constitution.

“Hawaii is a long way from Washington, D.C.,” said the senior Senator from Hawaii. “It is simply not possible for a bureaucrat here in Washington to understand the needs of my home state as well as I do.”

But Inouye said that with trust in Congress at an all time low and the need to pass a “grand bargain” on the deficit, he would extend the voluntary ban through 2013.

But he warned against a permanent ban.

“Over the past year, many of my colleagues have learned the hard way that being forced to request essential funding for their state puts them at a distinct disadvantage, and in many cases leaves them open to unseemly bargaining with the executive branch,” he said. “In the end, the Congress will have to choose between an open and transparent method for allocating targeted funding, or one that is done with phone calls, conversations, winks and nods. One method allows for accountability and another leaves us all at the whim of unelected bureaucrats.”

Toomey and McCaskill applauded Inouye’s move.

“This is a small but important victory for American taxpayers,” Toomey said. “I appreciate that the chairman of the Senate Appropriations Committee has listened to the American people and extended the earmark moratorium for an additional year. It is unlikely that this decision would have occurred without the heightened attention raised this week by the Toomey-McCaskill Earmark Elimination Act.”