Monday, 11 April 2011

US budget deal paves way for more spending fights

FESTIVE: Spectators snap the Washington Capitals ice-hockey team’s mascot during the Cherry Blossom Festival Parade in Washington on Saturday. Congressional leaders struck a last-minute budget deal on Friday to avert a government shutdown that would have closed attractions such as the festival. Picture: REUTERS
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US budget deal paves way for more spending fights

US President Barack Obama and congressional leaders struck last-minute deal to avert a government shutdown.
Published: 2011/04/11 07:51:53 AM

THE last-minute budget deal US President Barack Obama and congressional leaders struck to avert a government shutdown paves the way for what Republicans promised on Saturday will be more spending fights to come.

Just over an hour before a midnight deadline, Mr Obama’s Democrats and opposition Republicans agreed on Friday to a compromise that will cut about $38bn in spending for this fiscal year, which ends on September 30.

Congress then approved a stopgap funding measure to keep the federal government running until the deal can be formally approved in the next few days. Mr Obama signed it on Saturday.

"This is good news for the American people," Mr Obama said in his weekly radio address, but he said the agreement involved painful compromises.

"I would not have made these cuts in better circumstances. But we also prevented this important debate from being overtaken by politics and unrelated disagreements on social issues," he said.

Friday night’s agreement averted a shutdown that would have weakened the US economic recovery, forced furloughs for some 800000 federal employees, delayed pay cheques for troops in Afghanistan and Iraq, and closed national parks and monuments.

But Republicans made it clear that the pact did not mean they were ready to compromise on bigger budget fights in the weeks ahead as the government grapples with a budget deficit expected to hit $1,4-trillion this year.

"Washington has not been telling you the truth about the magnitude of the problems we are facing," said representative Paul Ryan, who announced a budget plan to save $6-trillion in the next decade, partly by cutting government-run health programmes for the poor and elderly.

"Unless we act soon, government spending on health and retirement programmes will crowd out spending on everything else, including national security. It will literally take every cent of every federal tax dollar just to pay for these programmes," he said on Saturday in the Republicans’ weekly radio address.

Senior administration officials told reporters the deal was a good sign that the two parties could work together on pressing issues, including increasing the debt ceiling and cutting the deficit.

"(There’s a) very important message tonight to the American people and hope for the future that our leaders can come together and ... produce what is the biggest annual spending cut in the history of the country," one said.

Americans have notoriously mixed feelings about deficits — they want low taxes, but resist talk of cuts in the Medicare and Social Security pension programmes.

As Democrats and Republicans traded blame and a shutdown loomed, the biggest incentive for the deal might have been the risks that failure would have posed for Mr Obama and other politicians of both parties just as the 2012 presidential election campaign gathers steam.

The government could hit the current $14,3-trillion limit on its borrowing authority by the middle of next month and will need Congress to approve another increase in that debt ceiling.

Congress must also approve a budget for the next fiscal year, a fight likely to last well into the 2012 campaign season when Mr Obama will be seeking a second term. Reuters

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