Rush to help airlines, travelers could crack open budget door

By David Lawder and Doug Palmer

WASHINGTON (Reuters) - Congress got rid of a headache on Friday when it rescued the flying public from flight delays caused by its budget cutting. But in the view of many lawmakers, the pain is just about to begin.

Members of Congress and groups representing people hit by across-the-board budget cuts, ranging from cancer patients to welfare recipients, say the quick action on air traffic control staffing underscored the importance of being visible to millions of Americans.

"What are we going to do, every time there's a fire we're going to put it out by moving some funds around? That's a shell game," said Representative Gerald Connolly, a Democrat from northern Virginia.

"I'm going to predict that there's going to be more weeping and gnashing of teeth, as sequestration sets in and we're going to continue to approach this on a piecemeal basis," he said.

Next in line for individual funding relief will be advocates for national parks, low-income housing, AIDS funding, meals on wheels and Community Development Block Grants, Connolly said, adding that budget cuts for these and other safety-net services will be felt severely by local communities.

Representatives for some of these other programs said it was the television images of lines in airports and the interviews with angry passengers that led to action, combined with the lobbying power of the travel industry.

"It means we worry about who's going to scream the loudest now," said Chris Hansen, president of the American Cancer Society Cancer Action Network, which has been lobbying against cuts in federal funding of medical research.

A heavy dose of lobbying from the airline and travel industry preceded the legislation enacted Friday, which permitted the Federal Aviation Administration to move money to avoid the furloughs of air traffic controllers that were causing the delays.

Sequestration - the $109 billion in automatic across-the-board budget cuts enacted by Congress and signed by President Barack Obama - formally took effect in March and barring Congressional action to replace it may continue for a decade.

Some programs won relief from Congress in March, notably the meat and poultry industry, which fought successfully to prevent furloughs of U.S. Department of Agriculture meat inspectors.

But because the furloughs in other programs, such as the FAA, were not immediately implemented, the impact was slow to build.

TRAVEL LOBBY

The travel industry began to accelerate its lobbying effort after it learned early last week from the FAA that as many as 6,700 flights per day could be delayed, potentially reducing capacity at major airports by 30 to 40 percent.

Nicholas Calio, president of Airlines for America, or A4A, the main airlines industry group, worked the phones throughout the week, said Jean Medina, senior vice president for communications at A4A.

"He certainly was in very close contact with a lot of people to make sure they understood what needed to happen," she said.

Its first course of action was to ask the administration for a 30-day delay.

When that was denied, the industry group began focusing on a legislative fix that would clear both houses with bipartisan support and be signed into law by Obama.

US Airways Chief Executive Doug Parker, who would head the world's largest airline if his carrier's merger with AMR Corp's American Airlines is approved, said he spent the past week making calls to government officials in his airline's hub markets to express concern about the furloughs.

"What I know is we're doing great disservice to the flying public and to the citizens of the United States and we need for this to get resolved," Parker told Reuters from Arizona earlier this week.

The non-profit U.S. Travel Association said it mounted its own "sequester offensive" in response to the furloughs and began a consumer texting campaign that connected travelers who had been delayed at airports to members of Congress.

The association also asked industry workers to contact their representatives in Congress to explain that the travel delays put their jobs at risk.

"We were in frequent contact with Congress urging them to solve this problem as soon as possible," Erik Hansen, director of domestic policy at the U.S. Travel Association, said on Friday. "We were able to generate hundreds of calls and emails to Congress and we're hoping that helped to move the ball forward," Hansen said.

VISIBILITY

Airlines for America reported about $6.3 million in lobbying expenses in 2012 according to the Center for Responsive Politics; the U.S. Travel Association spent about $1.7 million; US Airways and Delta about $2.8 million each.

While other interest groups have a lobbying presence in the national capital, they are hard pressed to match the visibility of air travel.

Compared to "longer lines at airports," said Cynthia Pellegrini, a vice president at the March of Dimes, which raises funds to improve the health of mothers and babies, "you can't see that a child's belly is emptier because her family couldn't get food assistance."

"We are not as well-heeled as the travel industry," said Deborah Weinstein, executive director of the Coalition on Human Needs, an alliance of social welfare organizations. "But I think as more people learn of this appalling choice," that Congress made on Friday, "they will get as mad as I am."

Senator Amy Klobuchar, a Democrat from Minnesota, home to a major Delta Air Lines hub in Minneapolis, was among the members backing an FAA budget fix on Thursday when the Senate passed it.

She called it a "practical, pragmatic answer to an immediate problem," but acknowledged that it does nothing to get Congress closer to fixing the problems caused by sequestration. More effects of the cuts, demonstrated dramatically to the public, could do that, she added.

She may not have long to wait. Organizations that have been more quietly protesting the budget cuts were rethinking their strategy on Friday in the wake of Congress' action.

"It is inexplicable why proven and effective Meals on Wheels programs get overlooked from exemption from the sequester when both the business and social case exists," said Ellie Hollander, President and CEO of Meals on Wheels Association of America.

"I guess that's because we need to be a different kind of squeaky wheel."

(Additional reporting by Karen Jacobs, Susan Heavy and Karey Van Hall; Editing by Fred Barbash and Tim Dobbyn)

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Budget cuts back in spotlight as flight delays mount

By Mark Felsenthal and Alwyn Scott

WASHINGTON/NEW YORK (Reuters) - The Obama administration on Wednesday backed a plan that would temporarily eliminate spending cuts disrupting U.S. air travel, while lawmakers in Washington scrambled to avoid blame as the impact of the reductions began being felt across the country.

Airlines pushed for the government to act as flight delays increased and planes stacked up at airports, with one chief executive saying, "We can't do this for long."

With Republicans and conservative commentators blaming President Barack Obama for using the across-the-board spending cuts known as sequestration to score political points, the White House said it supported Senate Majority Leader Harry Reid's proposal to replace the reductions by claiming savings from the drawdown of war spending.

"We support this effort to allow both sides to find a longer-term solution that replaces the sequester permanently in a balanced way so we can stop these harmful cuts that are hurting our economy and middle-class families across the country," White House spokesman Jay Carney told a briefing.

The administration would support the move as a temporary measure even though it does not raise revenues, Carney said.

Congressional Republicans have rejected the proposal, saying counting war savings is an accounting gimmick, but complaints about the air traffic delays have thrust sequestration back into the spotlight.

EFFECTS ADDING UP

Thousands of flights have been held on the ground, some for as long as two hours, since the Federal Aviation Administration began furloughing air-traffic controllers on Sunday. The intermittent delays have slowed travel at major hubs like Chicago, New York, Los Angeles and Atlanta, caused flight cancellations and stirred concern a chunk of the nation's economy could suffer if the situation persists or worsens.

For business travelers and tourists, the slowdown means missed connections and meetings. Private planes used by businesses are waiting while controllers first guide commercial flights into hubs, and they are carrying more fuel as a safety precaution, in case they are held in the air.

US Airways, Delta Air Lines, American Airlines and Southwest Airlines have warned that furloughs could cost hundreds of millions of dollars a year in lost revenue. The airline industry says it helps generate more than $1 trillion in economic activity in the United States annually and supports 10 million jobs.

"We can't do this for long without having major disruption to the flying public," US Airways CEO Doug Parker said in an interview. He said he called government officials at the airline's hubs last week, and that Congress and the Obama administration were trying to limit the damage.

The requirements have put pressure on FAA chief Michael Huerta, who was questioned in congressional hearings in the past two weeks about furloughs and the closures of smaller towers.

Huerta says the cuts are the only way to trim the agency's budget, and he said on Wednesday that flight delays had not been as bad as feared.

But industry critics said the FAA had not been forthcoming with information. "We didn't get a detailed briefing until Tuesday - a week ago Tuesday," said Jean Medina, a spokeswoman for the trade organization Airlines for America, or A4A.

Last Friday, A4A sought to block the furloughs in court, and the Air Line Pilots Association joined the A4A in launching a website that directs visitors to email or call congressional members on the issue. The ALPA represents nearly 53,000 pilots at airlines in the United States and Canada.

More than 12,000 people have used it to voice concerns since it went live on Friday. A map showing congressional districts shows large pockets of opposition in Chicago, the Northeast and California. Most of those posting comments oppose furloughs.

CONGRESS LASHES OUT

"These cuts simply punish everyone rather than specifically target the great number of outdated, wasteful and duplicative functions being funded with our taxpayer dollars," Iowa Republican Tom Latham said. "In short, arbitrary, non-targeted, across-the-board cuts are no way to run a government."

Members of Congress are offering a measure that would allow the FAA to transfer funds between accounts to minimize disruptions to air travel.

The sequestration cuts are the legacy of Republican efforts to pressure the Obama administration into spending cuts in exchange for raising the nation's debt limit. The White House and lawmakers agreed to hold up the threat of the reductions, which affect defense and non-defense spending equally, as incentive to reach a broader deficit-reduction deal.

When that deal never materialized, the cuts took effect on March 1. Although the administration broadly advertised the negative impact they would have, those effects were not evident right away.

Flight delays this week have revived the issue. Carney blamed Republicans on Wednesday for underestimating the negative impact of the spending reductions.

"Republicans in Congress made a political tactical decision to embrace the sequester," he said. Cuts proposed by House Budget Committee Chairman Paul Ryan would bite even more deeply than those under the sequester, he added.

But some Republican conservatives expressed support for the sequestration cuts on Wednesday, saying that they were long overdue.

"I don't understand this fascination with the Democrats right now with the sequester, and frankly some Republicans as well," Republican Representative Raul Labrador said.

(Additional reporting by Karen Jacobs in Scottsdale, Arizona; Editing by Ben Berkowitz, Mary Milliken and Peter Cooney)

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Republican senator sees Obama budget offer as positive

WASHINGTON (Reuters) - South Carolina Senator Lindsey Graham on Sunday became the first prominent Republican to publicly praise, however lukewarm, the budget proposal the White House outlined last week.

Graham said that while he believes President Barack Obama's plan is overall bad for the economy, "there are nuggets of his budget that I think are optimistic." He was speaking on NBC's "Meet the Press" program.

Graham, a conservative who has deviated from party positions in the past, and has said he would consider raising up to $600 billion in new tax revenue if Democrats accept significant changes to Medicare, the government health program for elderly Americans, and Medicaid, the health safety net for low-income people.

The White House on Friday said the president would propose a budget that would offer cuts to so-called entitlement programs such as Social Security, a retirement program, and Medicare in exchange for increased tax revenues and a commitment to spend money on education and infrastructure repair.

Obama's proposal, which will formally be made public on Wednesday, is a symbolic document, and both the Senate and House of Representatives have already passed their own budget resolutions.

The president's aides have said he hopes to use the offer to appeal to enough middle-of-the-road lawmakers of both parties to pass a broad deal to reduce the budget deficit.

Obama also hopes to reverse the deep spending cuts that automatically kicked in March 1 as a result of the failure of the White House and Congress to reach an agreement on replacing them.

Graham's reception of the president's budget proposal is warmer than fellow Republicans and some of the president's own allies have accorded it so far.

House Speaker John Boehner said last week the president was ignoring Republicans' staunch opposition to any tax hikes. And independent Senator Bernie Sanders, who votes with the Democrats, said he would oppose any efforts to lower payments to Social Security beneficiaries.

But Graham said that the president's offer contained approaches to cutting spending that he supports. One is the proposal to index cost-of-living increases for government program benefits to a less-generous measure of inflation.

"The president is showing a little bit of leg here, this is somewhat encouraging," Graham said. "He has sort of made a step forward in the entitlement-reform process."

Obama has invited 12 Republican senators for dinner on the day of the budget release as part of an effort to soften resistance among the opposition political party.

"The president's focus, in addition to the regular order process that members of Congress say they want, is to try to find a caucus of common sense, folks who are willing to compromise, that don't think compromise is a dirty word, and try to get something done," White House senior advisor Dan Pfeiffer said on ABC News' "This Week with George Stephanopoulos" program.

(Reporting By Aruna Viswanatha and Philip Barbara, writing by Mark Felsenthal)

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New York state senate pushes ahead with budget votes

By Cheryl Clark

ALBANY, NEW YORK (Reuters) - New York state's senate made a start on ratifying the state's budget in a session on Sunday afternoon even as the assembly said it would remain shuttered until Thursday in what may turn into to a race to beat the end-of-month deadline.

The budget looked like it would be the earliest since 1976 in a state known for regularly missing deadlines. New York Governor Andrew Cuomo inked a deal with legislative leaders late on Wednesday after days of closed-door meetings.

Cuomo had wanted the budget to be clinched this weekend ahead of the Passover and Easter holidays this week but last minute wrangling and rules that stipulate bills need to age for three days once they are printed are slowing down the process.

The budget needs to be passed by both houses before the start of the state's fiscal year on April 1.

Speaking to reporters outside the Republican conference room in the state Capitol in Albany, senate Republican Conference Leader Dean Skelos said he and Senator Jeff Klein decided to spend Sunday evening and the rest of the week passing budget bills even if Assembly Speaker Sheldon Silver does not call his members back into session until Thursday morning.

Skelos, a Republican, and Klein, a Democrat, lead a power-sharing arrangement in the senate.

"We believe this budget could have been finished a week ago, but for some reason issues that were closed were reopened," Skelos said. "Now it's up to the Speaker to make a determination as to whether he wants an on-time budget or he doesn't want an on-time budget."

Skelos said he expects all remaining budget bills to be printed on Sunday night in order to be available for voting on Wednesday. Cuomo could make an exception to the three-day rule but senate minority spokesman Michael Murphy said "all indications are that Cuomo won't" make that exception.

During the three-hour session that began at 3 p.m. with an hour of closed-door meetings senators passed budget bills on public protection and a bill that implements the transportation, economic development and environmental conservation budget.

The senate is planning to reconvene at 11 a.m. on Monday.

(Reporting By Edward Krudy; Editing by Marguerita Choy)

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A powerful voice pays off for Maryland during federal budget cuts

By Richard Cowan

WASHINGTON (Reuters) - Many members of Congress looked pretty helpless this week as they fought to save cherished programs in their states from across-the-board budget cuts.

But after Congress wrapped up work on a bill to fund the government through September, some members looked less helpless than others. Among them was Senate Appropriations Committee Chairwoman Barbara Mikulski, a Democrat from Maryland.

Neither Mikulski nor Congress as a whole saved any agency from the $85 billion in cuts known as the "sequestration." But thanks to the committee she leads, some programs based in Maryland emerged better off this week than they were the week before:

* The government's Agricultural Research Service, based in Beltsville, Maryland, got a billion dollars for agricultural research.

* The Coast Guard yard where ships are maintained in Curtis Bay, Maryland, just outside Baltimore; 600 military and civilian workers will be funded for the rest of this fiscal year thanks to $18.5 million allocated to it in the funding bill.

* The National Institutes of Health, the famed medical research facility based in Bethesda, Maryland, which got about $71 million more this year than the previous year.

* The National Institute of Standards and Technology, which got an increase of $43 million for labs and technical research, among other things. NIST is headquartered in Gaithersburg, Maryland.

* The Food and Drug Administration, in Rockville, Maryland, which got a total of $2.5 billion, about the same as last year.

* NASA, the space program, funded at $17.5 billion, with a big slice of it going to the agency's Goddard Space Flight Center in Beltsville, Maryland.

While they got funding from the committee, the agencies were still trying to figure out the precise gains in their budgets.

Asked about her results by Reuters, she said through a spokeswoman: "The good news is that Congress came together...preventing a (government) shutdown," Mikulski said. "In Maryland, that means NIH, NSA, FDA, NIST, Social Security and the other critical agencies are open and continuing their missions protecting national and community security and meeting compelling human needs."

While not a "redo" of the across-the-board sequestration - the total spending for the government is largely unchanged - the bill to fund the government (and prevent a shutdown) was a chance to do some rearranging, and the Appropriations Committee did.

These are not "earmarks" - the special gifts from members to specific projects often shrouded in secrecy. The programs Mikulski's committee aided benefit Americans well beyond the borders of Maryland and the extra money they got was appropriated in full public view.

Other members had success too. Republican Senator Roy Blunt of Missouri and Democratic Senators Mark Pryor of Arkansas and Christopher Coons of Delaware introduced the amendment that gave some relief to meat inspectors, who were going to be furloughed en masse due to the sequestration. All represent states with beef or poultry industries.

Many more failed, like Senator Jerry Moran, a Kansas Republican, who delayed Senate action on the continuing budget resolution in an unsuccessful effort to preserve air control towers operated by contract at small airports.

And Mikulski is not running away from her success. On the contrary, she issued press releases and statements.

"Mikulski Fights to Protect Jobs at U.S. Coast Guard Yard at Curtis Bay," said one.

"The Coast Guard Yard at Curtis Bay employs more than 600 military and civilian personnel," it said. "These federal funds will ensure that the Coast Guard can continue to do the work that is so crucial to America's homeland security and the economic security of Maryland."

Mikulski's state stands to lose a lot more than many others so she had more to protect. Maryland is where the federal money is.

Federal funds flow heavily to states like Maryland and Virginia because that is where many of the federal agencies are located, just outside of the nation's capital.

These have been tough times for federal workers in states like Maryland, where they have endured back-to-back years of pay freezes and the threat of temporary layoffs as they get caught in the crossfire of Washington's budget wars.

"It's a case of where it's maybe not as bad as under earmarks," said Steve Ellis, vice president of Taxpayers for Common Sense. Nonetheless, powerful members of Congress still have an outsized say over spending, Ellis said.

(Editing by Fred Barbash, Mary Milliken and Lisa Shumaker)

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House averts government shutdown, backs Ryan budget

By David Lawder

WASHINGTON (Reuters) - The House of Representatives eliminated the threat of a government shutdown next week, approving on Thursday a stop-gap funding bill that temporarily eases partisan tensions after months of bitter fights over budgets.

In a rare show of cooperation, the Republican-controlled House voted 318-109 to approve legislation that keeps government agencies and programs funded through the end of the fiscal year on September 30.

The debate over how to reduce the deficit will now focus on rival budget plans for fiscal 2014, that begins October 1, put forward by Republicans and Democrats.

While the two parties' proposals are vastly different, lawmakers were encouraged by the bipartisan collaboration shown in avoiding a damaging government shutdown.

Both parties have been chastened by bruising budget fights like the "fiscal cliff" negotiations that went down to the wire in January, and the failure by Congress and the White House to halt the automatic spending cuts triggered on March 1.

"We proved that when we set our mind to it, we can get complicated, hard things done," said House Appropriations Committee chairman Harold Rogers, a Kentucky Republican.

The vote gives Congress some breathing room to argue over which party has the better budget vision, but another showdown looms this summer over raising the federal debt limit.

House Speaker John Boehner said he would use the next debt limit increase deadline - likely in late July or early August - to demand more spending cuts and major changes to the federal healthcare and retirement programs.

'DOLLAR FOR DOLLAR'

He wants any increase in the federal borrowing cap to be matched by an equal amount of spending cuts, setting up potential repeat of the 2011 debt limit brawl that cost the United States its top-tier credit rating.

"Dollar for dollar is the plan," Boehner told reporters after the House votes.

Republicans chose not to use the March 27 expiration of spending authority and a potential agency shutdown as a leverage point to demand more spending cuts. Instead, they want to wage a campaign for deficit reduction centered on proposals from House Budget Committee Chairman Paul Ryan of Wisconsin.

Shortly before approving the spending bill, the House backed a budget blueprint offered by Ryan to eliminate U.S. deficits within 10 years through deep cuts in healthcare and spending on other social safety net programs.

The funding bill for the rest of this fiscal year, which the Democratic-led Senate approved on Wednesday, keeps in place $85 billion in automatic spending cuts, known as the "sequester."

But it takes some of the sting out of those cuts by allowing the military and several domestic agencies to shift some money within their reduced budgets to higher priority activities.

The Defense Department, for example, will be able to shift to operations and maintenance some $10 billion that would otherwise be locked in outdated, unwanted budget accounts.

The House vote prompted the Pentagon to announce a two-week delay in any decisions on how much of its 800,000-strong civilian workforce would be put on unpaid leave due to its $46 billion share of the automatic cuts. Officials want to analyze the measure's impact.

The funding measure will now be sent to President Barack Obama to be signed into law.

COMPETING VISIONS

Ryan's budget, marked by repeal of President Barack Obama's health care reforms and deep spending cuts to Medicaid for the poor and other programs, will define Republicans' positions in the rest of this year's fiscal battles and in congressional elections in 2014.

It will be matched by a Democratic budget expected to be passed on Friday by the Senate. That plan, from Senate Budget Committee Chairman Patty Murray, calls for $1 trillion in additional tax revenues, $100 billion in new infrastructure and jobs spending and modest cuts to health care programs.

And during the week of on April 8, President Barack Obama will finally weigh in with his own budget request, two months after it was due. Some analysts suggest this could try to cut a middle path between the Democratic and Republican visions.

The House voted 221-207, largely along party lines, to approve Ryan's non-binding budget resolution, with all Democrats and 10 Republican conservatives opposing it.

The Ryan plan aims to drastically shrink deficits over the next decade and reach a small surplus by 2023 without raising any additional tax revenue.

Like previous budgets that solidified his position as the Republicans' fiscal guru and helped him become the party's vice presidential candidate last year, it proposes major changes to the Medicare health care program for the elderly.

This popular but increasingly expensive program would be converted to a voucher-like system of subsidies for seniors to buy private health insurance or coverage through the traditional Medicare program.

Democrats complained the Ryan plan will crush near-term economic growth for the sake of an arbitrary goal of reaching balance in 10 years.

CREATING JOBS

"It adopts the European-style austerity approach that we've seen slow down economies in many parts of Europe," said Democratic Representative Chris Van Hollen, the top Budget Committee Democrat. "We should instead be focusing on job growth and putting people back to work."

Ryan countered that his plan draws a deep contrast with Democrats, whom he says are not serious about taming the growing U.S. debt of $16.7 trillion.

"It reveals each side's priorities. It clarifies the divide that exists between us," Ryan said of his plan. "We want to balance the budget. They don't. We want to restrain spending, they want to spend more money."

The Democrats' budget plan envisions deficits in the $400-600 billion range through the next decade, but maintains that these will average 2.4 percent of U.S. economic output, a level many economists view as sustainable.

The Democrats' budget seeks $1 trillion in new tax revenues by sharply curbing tax breaks for the wealthy and proposes $100 billion in new spending on infrastructure and job training.

It aims to replace the automatic spending cuts, half with revenues and the rest with other cuts, and offers only modest, undefined spending reductions to healthcare, while keeping the structure of social safety net programs largely unchanged.

(Additional reporting by Rachelle Younglai; Editing by Alistair Bell, Tim Dobbyn and Todd Eastham)

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Osborne boxed in by austerity on budget day

By William Schomberg

LONDON (Reuters) - Chancellor George Osborne faces the daunting task on Wednesday of delivering another austerity budget to a country impatient with near-zero growth.

The chancellor of the exchequer, as he is formally known, will make more cuts to day-to-day public spending as he tries to free up some cash for investment. He is also likely to announce another round of weaker economic forecasts.

Despite a slump in opinion polls, Osborne and Conservative Prime Minister David Cameron are sticking to their push to fix Britain's budget deficit and rising public debt, hoping for a recovery before they fight for re-election in two years time.

Cameron's spokesman prepared the way for another round of belt-tightening, saying on Tuesday that the country still faced "an unprecedented peacetime economic crisis", more than four years after the near collapse of the banking system.

Committed to fiscal austerity, Osborne may seek to get the Bank of England to do more with monetary policy to mend the weak growth that has knocked the government off its fiscal targets.

When the government took office in 2010, the budget deficit was a hefty 11 percent of gross domestic product (GDP), hammered by a global economic slump and years of over-reliance on London's giant international banks to provide tax revenues.

Britain's independent budget watchdog at the time predicted the deficit would fall to 1.1 percent of GDP by 2015-16, in part due to the tough cost-cutting measures laid out by Osborne.

The deficit in the fiscal year ending this month, on a like-for-like basis, is likely to be 7.7 percent of GDP, the watchdog said in December, among the highest in the European Union.

Rather than grow by nearly 3 percent this year - as forecast in 2010 - Britain's economy may be back in a recession again, while rising inflation is hurting households.

GROWTH QUANDARY

The government puts much of the blame on the crisis in the euro zone, Britain's main export market. The opposition Labour Party shows no mercy in hammering Osborne for his austerity.

Some inside Cameron's coalition are now showing unease. The Liberal Democrat business minister has questioned whether markets would punish Britain if it borrowed to fund growth.

Business leaders largely agree that fixing Britain's fiscal health should remain a government priority, for now. But John Longworth, head of the British Chambers of Commerce, thinks the government might need to reverse course and borrow more if there is no prospect of growth within six months: "It would be a sort of defibrillator approach to the economy," he said.

Osborne will announce on Wednesday that some government departments will have to cut spending by a further 1 percent in each of the next two financial years, on top of previously announced cuts to ministerial budgets, to provide an extra 2.5 billion pounds for investment.

"If this is the only additional investment in infrastructure in the budget, it will be a huge disappointment," said Chris Leslie, a Labour finance spokesman.

Other budget measures will include tax breaks to help working parents pay for childcare from 2015. There might also be further cut to corporate tax rates and an increase in the tax-free allowance for individuals' incomes, local media have said.

With little sign of strong growth any time soon, Britain could suffer further downgrades of its credit rating. Moody's stripped Britain of its prized triple-A rating last month.

CENTRAL BANK

Many in financial markets will pay most attention to what Osborne says about the Bank of England's remit. He wants the central bank to do more to boost growth on top of the 375 billion pounds it has spent on buying government debt. It has also cut interest rates to a historic low of 0.5 percent.

Osborne may announce a review of the Bank's official remit of targeting inflation of 2 percent, or take the bolder step of making growth less of a secondary objective for the governor.

The pound has lost about 7 percent of its value against the dollar so far this year. Much of the fall is due to speculation that the Bank might be encouraged to pump more money into the economy, either before or after its new governor, Mark Carney, arrives from the Bank of Canada in July.

Former monetary policymakers say any changes to the British central bank's remit must be made carefully.

Charles Goodhart, who served at the Bank from 1997 to 2000, argues that its flexible approach to fighting inflation had worked well for the past two decades. "Changing a long-term regime for short-term purposes would be undesirable," he said.

(Additional reporting by Andrew Osborn; Editing by Alastair Macdonald)

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Defense chief orders strategy review in response to budget cuts

WASHINGTON (Reuters) - Defense Secretary Chuck Hagel has directed senior Pentagon officials to re-examine the military strategy approved last year to see how priorities may have to be adjusted due to budget cuts that took effect on March 1, U.S. officials said.

The two-month review will define the major strategic choices and international challenges facing the military in the coming decade and will provide the framework for the 2015 fiscal year defense budget, according to a memo from Hagel obtained by Reuters on Monday.

The review also will provide the foundation for the Pentagon's Quadrennial Defense Review, which is due in February 2014. The congressionally mandated review assesses long-term threats and challenges facing the military and rebalances U.S. strategies and forces to meet them.

A senior Pentagon official said the review ordered by Hagel was not a "fresh start toward a new strategy," but would flow directly from the strategic guidance approved by President Barack Obama last year, which calls for a shift in emphasis to the Asia-Pacific region.

"The department hopes never to have to work toward the contingencies this review might identify," the official said. If the budget cuts, under a process known as sequestration, are lifted, "those contingencies are likely to go away," the official said.

(Reporting By David Alexander; Editing by Mohammad Zargham)

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Senate Democrats' budget plan has $400-600 billion deficits

By David Lawder

WASHINGTON (Reuters) - Annual deficits under a new plan from Senate Democrats would be in the $400-600 billion range for much of the next decade, a level they say would allow stronger near-term job growth than Republicans' balanced-budget vision.

The plan unveiled by Senate Budget Committee Chairwoman Patty Murray on Wednesday offers up some modest spending cuts and seeks nearly $1 trillion in new tax revenue, but leaves major government programs largely unchanged - a stark contrast to Republican Paul Ryan's radical revamp of healthcare benefits in an effort to slash deficits to zero by 2023.

Murray's plan, which is expected to be passed by the Senate Budget Committee this week, showed that deficits would average 2.4 percent of economic output through 2023, a rate many economists view as sustainable. The Senate hasn't passed a budget in four years.

Deficits have exceeded $1 trillion during each of the past four years due largely to economic damage from the recent financial crisis. Under the assumptions used in Murray's budget, the fiscal 2013 deficit is forecast at $891 billion, or 5.6 percent of gross domestic product.

The Democratic plan would add $5.2 trillion to public debt over the decade, pushing it above $18 trillion in 2023. As a share of a growing economy, however, the debt would decline gradually to 70.4 percent from 76.6 percent now.

The plan, given to Budget Committee members only after the panel opened debate on it, aims to shrink deficits by $1.85 billion over 10 years - including the replacement of about $960 billion in automatic spending cuts known as the sequester.

It adds $100 billion in new spending to rebuild roads, bridges, schools and workers' job skills and prescribes $975 billion in spending cuts and $975 billion in new revenues from the elimination of tax deductions and loopholes that benefit the wealthy.

"The highest priority of our budget is to create the conditions for job creation, economic growth, and prosperity built from the middle out, not the top down," Murray told the committee.

Ryan's plan, expected to be passed by the House Budget Committee late on Wednesday, aims to slash deficits by $4.6 trillion and reach a small surplus by 2023 through deep cuts to domestic social programs such as Medicaid healthcare for the poor.

Ryan's plan benefits from a $620 billion tax increase on the wealthy enacted in January, but will not levy any more new taxes. It calls for repeal of President Barack Obama's 2010 healthcare reforms for savings of $1.8 trillion.

For the third year in a row, Ryan has proposed major changes to the Medicare healthcare system for the elderly and disabled, converting it after 2024 to a voucher-like system that gives seniors a subsidy to purchase private health insurance or coverage through the existing fee-for-service Medicare program.

Murray's plan would make no changes to Medicare's structure but claims it will achieve $265 billion in savings from the program through unspecified efficiency changes that build on Obama's healthcare reforms. Senate Budget Committee aides said these would be determined by choices made in future legislation. Another $10 billion in savings would come from new efficiencies in the Medicaid program.

Budget Committee Republicans criticized Murray's plan as a timid effort that preserves the status quo in the face of a massive baby boom generation that will "bankrupt" Medicare.

"Their proposal goes to extraordinary lengths to shield the federal bureaucracy from any reform, even as millions of Americans are trapped in failed government programs," said Senator Jeff Sessions, the panel's top Republican. "The Democrat budget enriches the bureaucracy at the expense of the people."

The Democrats' plan would also reduce spending caps starting in 2015 for savings of $240 billion from the military, $142 billion from discretionary domestic spending and $76 billion from certain benefit programs. The programs and projects that would bear these cuts are not specified, leaving that task to appropriations committees.

On the tax side, the budget offers little specificity on which credits, deductions and loopholes should be closed to raise the $975 billion in new revenues.

The Ryan plan is expected to go to a floor vote in the Republican-controlled House next week, while the Democratic-controlled Senate will vote on the Murray plan. House and Senate leaders would then try to work out differences between the two.

(Reporting by David Lawder; Editing by Sandra Maler, Andrew Hay and Paul Simao)

View the original article here

PM Note: No Budget, No Cry

Biden to Rome - Vice President Joe Biden will lead the U.S. delegation to the Pope's inauguration mass, a White House official confirms to Mary Bruce.

No Budget, No Cry - Yesterday President Obama told George Stephanopoulos, basically, it's not a big deal if there isn't a budget. There's no way to get one that balances in 10 years, there may be no way to bridge the partisan gap, and there's no immediate debt crisis.

Transcript here - http://abcn.ws/YaBYij

That was the framing for his charm offensive trip up to Capitol Hill as the white smoke poured out of the chimney at the Vatican.

Jon Karl reports, first off, that the president got a standing ovation. There was also some levity: "The president informed the group that there was white smoke at the Vatican, and Rep. Billy Long of Missouri yelled out, 'Does that mean the White House is open for tours?' Obama responded: 'No, but the Vatican is.'" http://abcn.ws/Ybx2ts

But was there much in the way of headway? More Karl:

"Rep. James Lankford of Oklahoma accused Obama of being too focused on defeating Republicans and asked, "Can we agree that we need to get to a balanced budget in 10 years?" The president responded by saying that domestic spending had already been cut deeply, and that balancing the budget too quickly would hurt the economy."

"Rep. Dave Camp of Michigan, the chairman of the tax-writing Ways and Means Committee, asked if Obama and Republicans agreed on some entitlement reforms (specifically, means-testing for Medicare and reducing annual cost-of-living increases for Social Security), why couldn't those things be done now? The president said he would agree to those reforms only if Republicans agreed to raise tax revenues by closing loopholes, because we have to ask 'everybody to sacrifice.'"

'Heard it Before' - Here's what Boehner said later: "'I heard what the president had to say. I've heard it before. I thought it was good for all of our members to hear it so they have an understanding of where he's coming from,' Boehner said. 'We got big problems in our country. They need to be addressed. We're willing to get them addressed. I hope the president continues his outreach.'" http://abcn.ws/15NbXLk (John Parkinson)

You can sort of feel what the White House is getting at with the charm offensive. They at least want to look like they're trying to work together.

Here's what Jay Carney said today:

"We understand when Washington is dysfunctional - as Washington was dysfunctional when Republicans made the decision to allow the sequester to be implemented - that the American people look at that and say, enough already. They want positive action. They want bipartisan cooperation. And when Washington is dysfunctional, everybody in Washington looks bad. "

13 Republicans You Won't See at CPAC Tomorrow - The conference, which begins on Thursday, is mainly a debutante ball for upcoming presidential hopefuls and GOP stars. The headliners always make news; this year, Mitt Romney will deliver a speech, as will Rick Santorum, Marco Rubio, Virginia Attorney General Ken Cuccinelli and Rand Paul. Others, like Sen. Ted Cruz, will participate in smaller events off the main stage. This year, some notable names have been left off the list. There's only so much space, and organizers couldn't invite everyone. http://abcn.ws/WmHmBu (Chris Good)

Compelling Testimony - Military Sexual Assault Victims Testify - Former Army Sgt. Rebekah Havrilla, who was raped by a fellow service member while serving in Afghanistan, recounted on Capitol Hill today how she sought guidance from an Army chaplain after she unexpectedly encountered her assailant a year after the assault, and the chaplain told her it was "God's will" that she was raped. http://abcn.ws/10H2h2c (Saenz)

State Department Advice to Spring Breakers - Yahoo!'s Olivier Knox has this fun little nugget: "In a triumph of optimism over experience, the department urges revelers to 'avoid underage and excessive alcohol consumption.'" '""Overdoing it" leads to the majority of arrests, accidents, violent crimes, rapes, and deaths suffered by American students on spring break,' it says. 'As in the U.S., disturbing the peace, lewd behavior, littering, driving under the influence, drinking on the street or on public transportation may all be considered criminal activities by local authorities-is it worth it?'" - http://yhoo.it/XJhh0x

State Dept Briefing on Syria/New Fuel Sanctions - At today's State Department briefing, spokesperson Victoria Nuland explained the new sanctions targeting Syrian fuel exports. She said the sanctions target the sale of Syrian fuel on the open market by state-owned companies so that it can continue to fund its military machine. She explained they are not directed at the import of heating oil, cooking oil, etc. by non-US entities into Syria so as not to hurt the Syrian people. (Luis Martinez)

Mitch McConnell Ad Targets Women, Judd Supporters Say He Has a Problem With Women Voters - There's nothing like getting a head start. His re-election contest may be 20 months away, but Senate Minority Leader Mitch McConnell, R-Ky., possibly fearing an Ashley Judd candidacy, already has an ad targeted specifically at women voters that will run this week in his home state. http://abcn.ws/WaUs69 (Shushannah Walshe)

Obama: Gap Between Parties May Be 'Too Wide' for a Grand Bargain on Budget - In an exclusive interview with ABC News, President Obama spoke on a range of high-profile issues, including his outlook for the on-going budget negotiations, whether the Chinese government is behind the recent spate of cyberattacks against U.S. companies, North Korea's nuclear threats, same-sex marriage, and the conclave to select the next pope. - http://abcn.ws/ZJqOon (George Stephanopoulos)

47 Percent Filmer Will Come Out of Hiding - http://abcn.ws/10GQDo6

'Twilight,' 'Law and Order' Actresses Say 'No More' to Domestic Violence - A week after President Obama signed a bill reauthorizing the Violence Against Women Act, celebrities took to the Hill today, introducing a symbol they hope will advance the fight against domestic violence in the same way the pink ribbon did for breast cancer. http://abcn.ws/13TIykg

An Immigration Hawk Strikes a New Tone in the House - Fusion's Ted Hesson interviews Virginia Rep. Goodlatte (whose name you will hear again during the immigration debate) - "I have always talked about the immigration issue in the context of, 'We're a nation of immigrants,'" Goodlatte told ABC/Univision in an interview. "There's not a person that I speak to that can't go back a few generations or several generations and find someone in their family who came here lawfully to better their lives for themselves and their family. And yet we're also a nation of laws. "That's the challenge that we face right now," Goodlatte added. "Finding the way to promote both of those ideals." - http://abcn.ws/14WrdDf

Large Racial Gap Marks Trust on Immigration - Slightly more Americans trust Barack Obama than congressional Republicans to handle immigration, but with neither side garnering a majority and vast differences in preferences between whites and nonwhites in the latest ABC News/Washington Post poll. Americans overall divide by 45-39 percent between Obama and the Republicans in Congress in trust to handle the issue; the rest are undecided or trust neither side. Whites favor the GOP over Obama on immigration by 47-36 percent, while nonwhites (blacks, Hispanics and others) prefer Obama by a broad 71-16 percent. http://abcn.ws/10NzfBQ

Also Read

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President Obama Won't Balance Budget 'Just for the Sake of Balance'

In an exclusive interview with ABC News, President Obama rejected calls to balance the federal budget in the next ten years and instead argued that his primary economic concern was not balancing the budget, but rather growing the economy.

"My goal is not to chase a balanced budget just for the sake of balance. My goal is how do we grow the economy, put people back to work, and if we do that we are going to be bringing in more revenue," he said.

Obama rejected a proposal put forth by Rep. Paul Ryan today that would balance the budget in ten years, saying the Republican House member's plan "slashes deeply" at programs like Medicaid.

"We're not gonna balance the budget in ten years because if you look at what Paul Ryan does to balance the budget, it means that you have to voucher-ize Medicare, you have to slash deeply into programs like Medicaid, you've essentially got to - either tax - middle class families a lot higher than you currently are, or you can't lower rates the way he's promised," the president told me.

"So it's really, you know, it's a reprise of the same legislation that he's put before."

"If we controlled spending and we have a smart entitlement package, then potentially what you have is balance - but it is not balance to, on the backs of the poor, the elderly, students who need student loans, families that have disabled kids. That is not the right way to balance," he said.

The President is in the midst of busy week, during which he will meet with groups of lawmakers on Capitol Hill. Earlier today he met with Senate Democrats, tomorrow he meets with House Republicans, and Thursday he will cap off his meetings with a visit with Senate Republicans.

Tune in to " Good Morning America" tomorrow morning and " Also Read

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Dueling budget plans debut in Congress

By Richard Cowan and David Lawder

WASHINGTON (Reuters) - President Barack Obama's charm offensive to end Washington's budget wars hit a bump on Tuesday when Republicans and Democrats in Congress offered up vastly different plans to slash long-term deficits.

The competing budgets, both unlikely to get through Washington's divided government in their current form, raised fresh doubts about Congress reaching a compromise on taxes and spending, which polls consistently show the public wants more than any specific plan.

Instead, they appeared crafted to appeal to their respective party bases.

The Republican proposal, sponsored by House Budget Committee Chairman and former Republican Vice Presidential candidate Paul Ryan, promises to balance the budget without raising taxes in ten years. It would eliminate President Obama's health care overhaul and make large cuts in spending, particularly to so-called safety-net programs such as Medicare and Medicaid, the government health insurance plans for seniors and the poor.

Ryan is a likely contender for the 2016 Republican presidential nomination, and the proposal could serve him well in primary races where conservatives wield the most influence.

The Senate Democratic budget proposal, which began leaking out just as Ryan announced his proposal, would shrink budget deficits by $1.85 trillion over 10 years but not balance the budget. It is largely the work of Democratic Senator Patty Murray of Washington, who heads the Senate Budget Committee.

It would rely on an equal mix of spending cuts and tax hikes on the wealthy. At the same time, it would create a $100 billion fund for rebuilding crumbling roads and bridges, creating construction jobs.

Both parties claim backing from voters; Republicans because they were returned to power in the House in 2012; Democrats because Obama was re-elected.

Over the past week the Democratic president has begun wooing Republicans in Congress to work with him on a "grand bargain" to corral budget deficits that have topped $1 trillion in each of the past four years.

Republican lawmakers who dined with Obama in recent days said they were encouraged by their meetings.

But with proposals actually being put down on paper, in the form of 2014 budget blueprints, the air of bipartisanship seemed to evaporate, at least for now - even as Obama huddled Tuesday just off the Senate chamber with fellow Democrats to urge progress.

Indeed, among the warnings Obama got from some Democrats, according to Senators who attended the meeting, was not to cut safety-net programs.

"These were two ideological documents. They are both bargaining positions," said David Brown, a policy analyst at Third Way, a centrist think tank in Washington.

Brown added that for a budget compromise to be reached in coming months, Obama will have to convince the public of the need to reform "entitlement" programs, such as Medicare and Medicaid, although not necessarily as drastically as the Ryan budget requires.

Ryan, a leading conservative voice in Congress, took the wraps off of his budget outline for fiscal 2014 that begins October 1 and chastised the Obama administration for overseeing a rapid run-up in debt that now totals $16.7 trillion.

"You can't start really paying this debt down in a serious way until you balance the budget," he said. "The current high levels of debt we have today are a threat to our economy."

Ryan's budget, with its $4.6 trillion in deficit reduction over 10 years, was welcomed by Republicans in Congress. It was similar to the budget Ryan proposed for fiscal 2013 that won approval in the Republican House.

But its deep cuts in social safety net programs coupled with significant tax cuts for upper-income Americans, was roundly criticized by Democrats.

Democratic Senate Majority Leader Harry Reid of Nevada even challenged the Ryan plan's claim of achieving balance by 2023, saying it "relies on accounting that's creative at best and fraudulent at worst."

A senior Republican senator, Jerry Moran of Kansas, dismissed Murray's 2014 budget blueprint, saying, "all the Democrats can come up with for a budget is a trillion-dollar increase in taxes."

A GULF TO BRIDGE

As has been the case since early 2011, when deficit reduction took center stage, Democrats and Republicans were fighting over the same, fundamental questions: Should budget deficits be attacked with spending cuts, tax increases or a combination?

A McClatchy-Marist poll released Tuesday showed that Democrat respondents prefer increasing taxes over cutting spending by a margin of 65 percent to 27 percent.

The pattern was reversed for Republicans surveyed, who preferred cuts to tax increases by 79 percent to 14 percent. Support for cuts declined when specific programs are mentioned.

But seven in ten of all those polled said they believed it is more important "for government officials to compromise" to find a solution than to insist on their own goals.

"The gulf we have to bridge is just as big as it ever was," said Representative Chris Van Hollen of Maryland, the top Democrat on the House of Representatives Budget Committee.

But for all the squabbling washing over Capitol Hill on Tuesday, Obama did not seem rattled.

Senator Benjamin Cardin, a liberal Democrat from Maryland who attended Tuesday's lunch with Obama, told reporters: "On the budget issues, he acknowledged that 'look, the best course now, is to let the budgets go, get them into conference, and try to reconcile the two.'"

In other words, the president advised each side to pass their respective budgets, ones that will appeal to their core political supporters, and then work out the differences the old-fashioned way in a House-Senate negotiating group.

That will be a complicated task however and Obama got a taste of it from liberal Democratic senators who at lunch expressed their concern with the president's willingness to potentially cut social programs like Social Security retirement benefits and Medicare healthcare for the elderly and disabled.

As Obama reaches across the aisle, his approval rating jumped up four percentage points from last week to 47 percent, according to a Reuters/Ipsos online poll released on Tuesday. But the percentage of Americans who disapprove of his performance at 50 percent was still higher than his approval rating. Fifty-seven percent of people said the country is going in the wrong direction, compared to 27 percent who think it is on the right track.

Meanwhile, a budget brush fire erupted on another front on Tuesday.

Legislation in the Senate to avert a March 27 government shutdown was being slowed by Republican senators. They expressed concerns over how money was being spent in the Democratic bill to fund federal agencies through September 30.

Leaders in the Senate and House of Representatives are nonetheless hoping to finish this short-term funding bill by next week.

(Reporting by Richard Cowan, David Lawder, Rachelle Younglai and Thomas Ferraro; Editing by Fred Barbash, Xavier Briand and Tim Dobbyn)

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Liberal Democrats fear Obama may give away too much on budget

By Rachelle Younglai and Mark Felsenthal

WASHINGTON (Reuters) - As President Barack Obama tries to improve relations with Congress, it is not only Republicans who are wary of him but also some Democrats, who on Tuesday warned the president not to compromise their liberal principles in return for a budget deal.

At a lunch with Senate Democrats, Obama said it was critically important to work with Republicans in order to reach a "grand bargain" to reduce the country's budget deficit, according to lawmakers.

"Of course some of us responded by saying 'Yes. But what is in that grand bargain?' We don't want to start whacking away at Social Security," Iowa Senator Tom Harkin told reporters after the lunch.

The liberal Democrats are worried Obama wants to use a less generous inflation index to calculate increases in Social Security retirement benefits. The lower index, known as the chained consumer price index, takes into account changes in consumer buying habits and could trim spending, and thus retirees' benefits, by $130 billion over 10 years.

Senator Bernie Sanders, an independent from Vermont who caucuses with the Democrats, called the lower inflation index a "stupid" idea.

"I think the much better approach is how to bring more revenue into the system," Sanders told Reuters after the lunch. "There are ways to address these problems without cutting benefits. That is the case I made to the president," he said.

When asked how Obama responded to their concerns, Harkin said the president said things were open for negotiation.

Obama's visit to Capitol Hill came as Republican and Democratic lawmakers introduced competing plans to deal with long-term budget deficits. Republicans proposed balancing the budget in 10 years with $4.6 trillion in spending cuts. Democrats proposed trimming deficits by $1.85 trillion over 10 years in part through tax increases on the wealthy.

TOUGH CHOICES

The White House acknowledged Democrats' concerns over federal benefits programs and said on Tuesday Obama has made proposals that include items that are very tough choices for his fellow Democrats to go along with.

Obama's discussion with Senate Democrats was the first in a series of meetings the president has scheduled with lawmakers this week. Obama will meet with Republicans in the House of Representatives on Wednesday and then with Senate Republicans and House Democrats later in the week.

After a combative campaign to prevent deep spending cuts that went into effect March 1, Obama has shifted gears and adopted a less confrontational approach to achieve a deficit reduction package he says must include both spending cuts, reductions to entitlement programs such as Social Security, and greater revenues.

White House aides said the change in tone reflects a desire by the president to move away from crisis-driven bare-knuckles negotiations to a more collegial process that aims at building consensus around a deal over time.

They said Obama switched tactics to try to engage individual lawmakers rather than the Republican leadership, because Republican House Speaker John Boehner had said he would simply not discuss raising revenues.

Obama's aides believe the best move right now is to deal with rank-and-file members. If a consensus can be reached, it might give Boehner and Senate Minority Leader Mitch McConnell some political cover from their right wing.

Last week, Obama dined with rank and file Republicans. After that, Senate Democrats were also looking for some "love" from the president, said one Senate Democratic aide.

But although lawmakers from both parties have said Obama's efforts will help improve relations with Congress, Sanders said it was not just about the interactions.

"It is what you are proposing," he said.

(Reporting by Rachelle Younglai and Mark Felsenthal; Editing by Alistair Bell and Todd Eastham)

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PM Note: Stephanopoulos to Interview Obama, Three Trips to the Hill, Awaiting Ryan's Budget

Tomorrow: George Stephanopoulos To Interview President Barack Obama.

Get the first taste at http://abcnews.com/politics and on World News at 6:30 p.m., Tuesday.

The bulk will air on Good Morning America Wednesday. http://abcn.ws/13SiO85

Earlier Tuesday President Obama takes his charm offensive to Capitol Hill. It'll be his first of three straight days of trips up Pennsylvania Ave.

Tuesday - Senate Democrats, Wednesday - House GOP Thursday - Senate GOP and House Democrats

When was the last time a sitting president took three days to mosey up to Capitol Hill for closed-door meetings?

This week will mark the president's third meeting with the House GOP caucus.

Flashback: One of the most fun moments of his presidency was his raucous Q and A with the House GOP at their 2010 retreat in Baltimore when he was seeking bipartisanship and selling health care reform.

It didn't ultimately work back in 2010 (no Republicans supported Obamacare), but what he said back then sounds not unlike something he could tell the House GOP on Wednesday:

"Yes, I want you to challenge my ideas … I want you to stand up for your beliefs. The only thing I don't want … is for Washington to continue being so Washington-like." abcn.ws/WEBeH9

Also Tomorrow:

The Ryan Budget to be Released - Will Fractured House Republicans Unite on Budget? John Parkinson's preview is here: - Tomorrow morning, House Budget Chairman Paul Ryan will release the latest version of his budget blueprint, setting the federal government on a course to balance annual revenue and spending levels by the year 2023. http://abcn.ws/ZtxMdH (John Parkinson)

Hours After Seeking Bipartisanship with House GOP… Obama to Huddle With Organizing for Action Group - President Obama will formally inaugurate Organizing for Action, his newly-formed independent advocacy group, with a headline speech Wednesday night before the group's Founders' Summit in Washington. http://abcn.ws/14Nd6Am (Devin Dwyer)

The Real Frank Underwood? Is Rep. Kevin McCarthy the real Frank Underwood? The real-life House majority whip told CNN's Candy Crowley that he gave Kevin Spacey one of his signature lines in the Netflix hit show "House of Cards," the main character of which is Spacey's Frank Underwood, an ultramanipulative, Machiavellian House majority whip who plots to snag the vice presidency and ruins a few lives in the process. http://abcn.ws/Y4eG0x (Chris Good)

ABC News / Washington Post Poll - On Eve of Conclave, Record Criticism of Church For its Handling of Sexual Abuse Scandals - From Gary Langer: "… an overwhelming 78 percent of Catholics now disapprove of how the church has handled the issue of sexual abuse of children by priests, and two-thirds disapprove strongly - the highest and strongest disapproval since the scandals erupted more than a decade ago, up sharply since U.S. church leaders sought to address the issue in 2004. Sixty percent of Catholics, more generally, describe the church as "out of touch" with the views of Catholics in America, and by 54-38 percent Catholics urge a new direction by the next pope, away from traditional policies and toward new approaches that better reflect "the attitudes and lifestyles of Catholics today." Less-frequent churchgoers, in particular, seek change - but even among those who attend Mass frequently, more than half call the church out of touch." http://abcn.ws/16n1ZS9

Thomas Perez Could Become Only Latino In Obama Cabinet - President Barack Obama is expected to tap Thomas Perez, the head of the Department of Justice's civil rights division, to serve as his next labor secretary. http://abcn.ws/XDkazS (Jordan Fabian)

GOP Guv's Medicaid Connundrum - Florida Governor Rick Scott's surprise plan to expand Medicaid throughObamacare with Feds hits wall in legislature - http://bit.ly/X0EuYg

Storify: Michelle Obama Hosts Twitter Chat About Let's Move! Campaign Twitter Users #AskFLOTUS About Health As Part of @LetsMove Campaign First lady Michelle Obama chatted with Americans over Twitter about exercise and eating right Monday morning. http://abcn.ws/YWwaYR (Sarah Parnass) Judge Skeptical of Ex-Senator's Campaign Cash Use - A federal judge sounded skeptical Monday of former Sen. Larry Craig's claim that he properly used $217,000 in campaign funds for his legal defense after his arrest in a 2007 airport bathroom sex sting. http://abcn.ws/ZDWucu

Hagel Orders Review of Rules in Military Sex Assault Convictions Defense Secretary Chuck Hagel says he is ordering a review of the rules that allow a military commander to overrule court martial convictions by military juries. Hagel wrote a letter to Sen. Barbara Boxer, D-Calif., which is posted on her website. http://abcn.ws/13Q3Fnt (Matthew Larotonda, Luis Martinez)

Debbie Dingell Considers Michigan Senate Run, Per CNN's Dana Bash - http://bit.ly/15I7BVP

Also Read

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Focus shifting in Congress from automatic cuts to dueling budget plans

By David Lawder and Mark Felsenthal

WASHINGTON (Reuters) - With little prospect of getting rid of the automatic spending cuts that kicked in on March 1, the Congress and the White House will move on to bigger budget battles this week as dueling Republican and Democratic proposals land in the House of Representatives and the Senate.

Neither budget plan is likely to be enacted. But the proposals to be submitted by Republican Representative Paul Ryan of Wisconsin and Democratic Senator Patty Murray of Washington should frame the debate over the government's taxing and spending priorities for the next few months and possibly into the 2014 Congressional elections.

The budgets from Ryan and Murray, who chair the budget committees in the two chambers, are widely seen as wish-lists unacceptable to the opposing party, underscoring the depth of the fiscal divide.

Ryan plans to unveil on Tuesday a slightly modified version of the budgets passed by the House in each of the past two years, cutting spending by $5 trillion over a decade and partially privatizing the Medicare health plan for retirees and dismantling President Barack Obama's healthcare overhaul law.

With the help of $620 billion in new tax increases on the wealthy as a result of the January "fiscal cliff" deal, Ryan's plan aims to balance the budget by 2023, compared with 2040 in his last year's proposal. But further tax increases are out of the question, he said on Sunday.

Murray has signaled that her budget will aim to give the economy some breathing room to allow faster growth in the next few years, while maintaining social safety net programs and making critical investments in education and research.

Her budget is not expected to achieve balance as Ryan's does, but will aim to shrink deficits down to a sustainable level that will allow debt as a percentage of the economy to start declining.

The plan will get there by eliminating some of the estimated $1 trillion in "tax expenditures" - subsidies paid through tax deductions, credits and other exclusions. Based on Murray's comments and recent Senate Democratic proposals to replace the automatic cuts, these loophole closures will focus on the wealthy.

"At a time when we absolutely must cut where we can, looking at ways we can close special tax breaks that aren't targeted to help the middle class or our economy just makes sense," Murray told a Senate Budget Committee hearing last week.

"There's no good reason, for example, that taxpayers currently subsidize millionaires more, when they purchase a second home, or a yacht, than they do middle-class families purchasing their first home."

Many Republicans, including Ryan, also want to close these loopholes, but they want to divert the savings to reduce tax rates. This sort of comprehensive tax reform, they argue, will create a simpler, cleaner tax code that will foster economic growth.

The budget proposals will focus on the 2014 fiscal year that starts on October 1, leaving in place the first $85 billion in automatic cuts - called the "sequestration" - at least for the time being.

A Senate Democratic bill to fund the government through the end of the current fiscal year will make no effort to replace the cuts, focusing instead on ways to grant agencies authority to better manage their expenditures.

"We know that coming up with the $85 billion to solve sequester has to be done at the leadership and presidential level," the bill's author, Senate Appropriations Committee Chair Barbara Mikulski of Maryland, said last week.

The White House on Monday acknowledged that elimination of the across-the-board spending cuts will likely come only as part of a larger, comprehensive budget deal with Republicans, many of whom are determined to keep the $85 billion in savings.

"So, our focus now, as the president has said, is on working with Congress" on the regular budget process, "and through that process hopefully produce a bipartisan agreement on deficit reduction," White House spokesman Jay Carney told reporters.

NEW STARTING LINES

The week marks "a transitional moment" for Congress, said one aide, because it represents a return to the normal legislative process of considering budget resolutions in both chambers.

For more than two years, Washington has lurched from crisis to crisis amid "leadership-brokered" deficit deals and stop-gap spending extensions.

The Democratic-controlled Senate has not passed a formal budget resolution in nearly four years.

By returning to so-called "regular order," the Republican-controlled House in particular aims to engage more lawmakers in the process of deciding how to cut deficits so that there is more support among rank-and-file members for the finished product.

The last two major deficit deals were reached at the last minute at the highest levels of the White House and Congress, staving off a potentially devastating debt default in 2011 and averting a massive tax increase on January 1.

Obama will continue his efforts to engage congressional Republicans and Democrats directly, by holding meetings with lawmakers this week.

Obama's shift to a "charm offensive" in dealing with members of Congress likely reflects a sense of public weariness from endless budget battles, said Steve Bell, a former staff director of the Senate Budget Committee and now with the Bipartisan Policy Center, a Washington think tank.

"It's important to change the subject away from debts and deficits and instead talk about things where you can make progress - immigration reform, for example, or on guns," Bell said.

With the effects of the automatic spending reductions yet to fully kick in, the president may be counting on public pressure to build on for an alternative to the deep cuts, Bell said.

In the meantime, the president can establish links with members of Congress of both parties and work on other issues.

(Editing by Fred Barbash and Mohammad Zargham)

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Ryan says budget deal possible as he readies his own plan

WASHINGTON (Reuters) - The Republicans' point person on fiscal issues in Congress said on Sunday that compromise with President Barack Obama is possible on taxes and spending even though his soon-to-be-unveiled budget plan faces certain rejection from Obama's Democrats.

Representative Paul Ryan, the chairman of the House of Representatives Budget Committee, acknowledged that Democrats who control the Senate are likely to defeat his proposal to repeal Obama's signature healthcare law and other elements of his plan to balance the budget within 10 years.

But Ryan, whose ideas on taxes and spending gained national prominence when he was selected as the Republican vice-presidential candidate last year, said Democrats and Republicans might be able to agree on less dramatic steps that would narrow budget deficits in coming years.

"There are things that we can do that don't offend either party's philosophy, that doesn't require someone to surrender their principles, that make a good down payment on getting this debt and deficit under control," Ryan said on "Fox News Sunday."

Ryan had lunch with Obama last week as part of an effort by the president to reach out to Republican lawmakers to resolve a fiscal standoff that has slowed economic growth and generated repeated crises over the past two years.

"This is first time I've ever had a conversation with the president lasting more than, say two minutes, or a televised exchange," Ryan said of their meeting.

"We exchanged very different frank and candid views of one another that were very different. But at least we had this conversation," he said.

Ryan's budget blueprint, due to be unveiled on Tuesday, will open the next front in Washington's fiscal battle over how to tame the growth of the $16.7 trillion federal debt.

It would cut spending by $5 trillion and partially privatize the Medicare health plan for retirees in order to balance the budget in 10 years, he said.

Though the plan is likely to win approval in the Republican-controlled House, it faces steep odds in the Democratic-controlled Senate, where Senator Patty Murray is preparing a blueprint that is expected to reduce breaks for wealthy taxpayers and keep safety-net spending largely unchanged.

SIMILAR CUTS, DIFFERENT RESULTS

Ryan's plan to balance the budget in 10 years is a dramatic change from last year's plan, which also envisioned $5 trillion in cuts but would not have balanced the budget until 2040.

Ryan's budget-balancing efforts are helped by the $620 billion in tax increases on the wealthy that Obama won in a January 1 deal to avert the "fiscal cliff."

But further tax increases are out of the question, he said.

"We already had a tax increase. We think it's unfair to ask hardworking taxpayers to pay more so Washington can spend more," he said.

Both Republicans and Democrats want to simplify the tax code to reduce the tax breaks and loopholes that have proliferated since the last comprehensive rewrite in 1986.

But they have contrasting goals: Republicans want to use those savings to lower rates, which they say would boost economic growth. Obama and other Democrats want to put that money towards deficit reduction.

Ryan's budget plan also rests on several other approaches that Democrats have rejected in the past.

It would impose deep cuts on food assistance for the poor and dramatically scale back federal contributions to the Medicaid health program for the poor. It would give retirees an option to stay in the current Medicare health program or use a subsidy to purchase private coverage, an approach that Democrats say would weaken the existing program and force seniors to shoulder more of their own health costs.

Obama is not likely to back those ideas this time around, either, Ryan acknowledged.

"My guess is he won't," Ryan said. "But are there some things we can do short of that that gets you closer to balancing the budget, that delays a debt crisis from hitting this country? Yes, I think there are."

After four straight years of deficits over $1 trillion, the nonpartisan Congressional Budget Office projects that the fiscal 2013 gap will fall to $845 billion. As the economy improves, deficits will narrow to around $430 billion by 2015, CBO said, but they are projected to rise after that, nearing $1 trillion again by 2023 as the massive "baby boom" generation ages and draws more retirement and health benefits.

(Editing by Eric Walsh)

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Obama lunches with budget hawk Ryan, deal still far off

WASHINGTON (Reuters) - Legislation easily passed the House of Representatives on Wednesday to avert another partisan budget battle and a possible government shutdown, as President Barack Obama also opened new lines of communication with Republicans.

By a vote of 267-151, the House passed a measure to fund government programs until the end of the fiscal year on September 30. The Democratic-controlled Senate is expected to pass a similar bill next week.

Without such legislation federal agencies would run out of money on March 27.

The bill to continue funding the government without last-minute drama came as Obama took the unusual step of inviting Republican senators to a dinner on Wednesday night at a Washington hotel a few blocks from the White House, which lasted about an hour and a half.

An administration official told Reuters Obama was hoping to take advantage of a lull in a series of budget crises to launch a dialogue with Republican lawmakers, which he hopes will lead to a broad deficit-reduction deal.

While the dinner was not intended to be a negotiation, it was an opportunity for Obama to correct the record on a perception among some Republicans that he is unwilling to consider some difficult spending cuts that are unpopular with his fellow Democrats in Congress.

Those could include cuts to programs that include the Social Security pension system and Medicare for the elderly.

Discussion at the dinner was expected to concentrate on budget issues, the official said. Obama will discuss his other legislative priorities, including immigration reform, gun control and tackling climate change, at meetings on Capitol Hill next week.

In another bipartisan gesture, Republican Senate Minority Leader Mitch McConnell said that at his suggestion, Obama will join Republicans for a lunch on Capitol Hill on March 14.

Obama is also due to meet with congressional Democrats next week, the White House said.

The meetings, whether or not they produce results, depart from what has been an at best a stand-offish relationship between Obama and Republicans in Congress.

They suggest that Obama and Republicans are getting the message that public patience with Washington is wearing thin. This has become apparent as Americans read of inconveniences they may soon confront at airports and elsewhere as a result of across-the-board cuts to the federal budget that kicked in on Friday after lawmakers and the White House failed to agree on an alternative.

"This is the first indication in really a long time that the president is willing to exert leadership and bring people together and that's exactly what needs to be done," said Republican Senator Susan Collins of Maine, who has spoken by phone in recent days with Obama.

REPUBLICAN DOUBTERS

At the heart of the bitter budget dispute are deep differences over how to rein in growth of the $16.7 trillion federal debt. Obama wants to narrow the fiscal gap with spending cuts and tax hikes. Republicans do not want to concede again on taxes after doing so in negotiations over the "fiscal cliff" at the New Year.

Despite the scheduled dinners and meetings and the vote on funding the government, few expect those differences to be resolved any time soon.

Some Republicans remain skeptical of Obama's overtures. "This president has been exceptional in his lack of consultation and outreach to Congress," said John Cornyn of Texas, the second-ranking Senate Republican.

Cornyn, like Collins, was not invited to dinner with Obama, but he warned that talk of tax increases would be unwelcome. "I don't know if the purpose of the meeting is social or if he has an agenda. But if it is about raising taxes, we're done."

While Republicans have taken most of the beating in surveys in connection with the so-called sequestration, a Reuters/Ipsos online poll released on Wednesday showed 43 percent of people approve of Obama's handling of his job, down 7 percentage points from February 19.

Confounding the White House's efforts to blame Republicans for the spending cuts, most respondents in the online survey hold both Democrats and Republicans responsible.

As recently as last month, Republicans were threatening to use the bill to fund the government, called a "continuing resolution," to extract spending cuts from the White House.

Instead, the bill they fashioned, which passed on Wednesday, embraced the $85 billion in automatic spending cuts that were triggered last Friday, while providing some additional spending flexibility to the military and other security operations.

Republican Representative Tom Cole of Oklahoma said his party would like to shift the cuts to other areas of the budget, noting that there are 20,000 military employees in his Oklahoma district.

"We'll sit down and renegotiate where they should come from," Cole said in the debate on the House floor. "We think we've got some great ideas, but they (the cuts) are going to occur. They're the first and appropriate step for getting our fiscal house back in order."

Many Democrats in the Republican-controlled House voted against the funding bill because it would not give the Obama administration flexibility in carrying out the new, automatic spending cuts for domestic programs such as education. Last month, Democrats had sought to replace about half of the automatic cuts with tax increases on the rich.

"This bill falls short in a number of areas, but most of all because it does nothing to prevent the loss of 750,000 jobs that will result because of the sequester," said Representative Chris Van Hollen, the senior Democrat on the House Budget Committee.

(Additional reporting by Mark Felsenthal, Susan Heavey, Thomas Ferraro and Rachelle Younglai.; Editing by Fred Barbash and David Brunnstrom)

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