Budget deal in the US would stop another government shutdown

Bipartisan agreement sets spending cap at US$1 trillion for the next two years and ends cycle of fiscal feuding that has left Washington paralysed

PUBLISHED : Wednesday, 11 December, 2013, 4:34pm
UPDATED : Friday, 13 December, 2013, 5:34pm

Congressional negotiators have reached a modest two-year US budget deal that would avoid a repeat of October's government shutdown.

It also signals a temporary truce in fiscal wars that have paralysed Washington.

The agreement, brokered on Tuesday by Democratic Senator Patty Murray and House Republican Paul Ryan, sets the new annual budget caps for this year and 2015 at just more than US$1 trillion.

It is slightly higher than current levels and partially repeals the unpopular automatic budget cuts known as "sequestration".

Importantly, a budget bill under the agreed framework would free legislators to focus on how to reduce the main drivers of the country's debt, such as entitlement programmes including Medicare, without the spectre of a budget showdown every six or 12 months.

Ryan, the Republican vice- presidential nominee last year and chairman of the House Budget Committee, emphasised the deal would not raise taxes and added: "I see this agreement as a step in the right direction."

Murray, the Senate's top budget chief, said she and Ryan had set aside political differences.

She said they had "broken through the gridlock and reached a bipartisan budget compromise that will prevent a government shutdown in January".

Barack Obama hailed the agreement as a sign of rare bipartisan co-operation in the strife-filled US legislature.

"It's a good sign that Democrats and Republicans in Congress were able to come together and break the cycle of short-sighted, crisis-driven decision-making to get this done," he said. Under a deal reached in October that ended a 16-day shutdown, federal spending authority expires on January 15, when a new budget will need to be in force.

Tuesday's deal - the first by a divided Congress since 1986 - provides for US$85 billion in mandatory savings while creating US$63 billion in sequestration relief, leaving US$22 billion in deficit reduction.

Obama said he was pleased the deal worked towards replacing sequestration cuts, which he said had "served as a mindless drag on our economy ".

The deal sets the warring Democratic and Republican parties on track for further co-operation on budget policy, ending the cycle of fiscal feuding that has scarred Washington since 2011.

"We have lurched from crisis to crisis and from one cliff to the next. And when one countdown clock was stopped it wasn't too long before the next one got started," Murray said. "That uncertainty was devastating to our fragile economic recovery."

House Speaker John Boehner, a Republican, said it was a "positive step forward by replacing one-time spending cuts with permanent reforms to mandatory spending programmes that will produce real, lasting savings."

The challenge now is selling the agreement to sceptical conservatives in the House of Representatives and Senate.

Each chamber must pass a budget bill by January 15 or risk another government shutdown.

But Florida's Republican Senator Marco Rubio was quick to oppose the deal, saying it merely furthers "Washington's irresponsible budgeting decisions" by spending more than the government brings in.

"We need a government with less debt and an economy with more good-paying jobs, and this budget fails to accomplish both goals, making it harder for more Americans to achieve the American Dream," Rubio said.