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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Senate approves funding bill to avert government shutdown

By David Lawder

WASHINGTON (Reuters) - Senate leaders on Wednesday cleared roadblocks to a vote on legislation to avert a government shutdown next week, denying some senators' attempts to attach provisions that would shield pet programs from automatic spending cuts.

The Senate began considering a limited number of amendments on the stop-gap measure to keep the government running the rest of this fiscal year, before a vote on final passage later on Wednesday.

Government agencies and programs face a shutdown after March 27 when current spending authority expires, and Congress is scheduled to start a two-week recess on Friday.

Controversy over proposed amendments aiming to protect money for programs ranging from meat inspection to air traffic control also delayed the Senate's consideration of its first budget resolution in nearly four years.

Late last week, there were more than 100 proposed amendments to the budget resolution that would apply to the next fiscal year that starts on October 1, including many requests to shift funds to ease effects of across-the-board cuts under the so-called "sequester."

But a deal reached between Senate Majority Leader Harry Reid and Republican Senate leader Mitch McConnell paved the way for consideration of just a handful of these proposals.

Republican Senator Jerry Moran of Kansas on Tuesday had tried to block Senate consideration of the spending bill for the rest of this fiscal year unless he was promised a vote on his proposal to shield air traffic controllers at small, rural airports from the spending cuts.

Moran's sparsely populated home state depends heavily on small airports and is home to several civil aircraft manufacturers. He said staff reductions or shutdowns of rural control towers would remove a critical safety layer in the air traffic control system.

"Once there is an accident, and somebody dies and a plane crashes, the question will always be ‘what if there had been an air traffic control tower there? What if we had left the program in place?" Moran told the Senate.

Moran's amendment will not be considered, but the Senate approved a proposal to shift some $55 million in Department of Agriculture funds to prevent temporary layoffs of meat inspectors. A plan to shift some national parks-related funding to keep White House tours open was defeated.

The Senate funding measure keeps the $85 billion in sequester cuts for this year in place, but contains some updates to spending provisions for the military and some domestic agencies that allow more flexibility to help ease the cuts.

The measure would need to be approved again by the Republican-controlled House of Representatives, which had passed a much simpler version, giving additional spending flexibility just to military programs.

Once the temporary spending measure gets through Congress, the Senate will turn its attention to a Democratic-focused budget plan for next fiscal year that calls for raising nearly $1 trillion in new tax revenue, while replacing the sequester cuts and making some other modest spending cuts.

The Democratic plan, which also calls for $100 billion in new spending on infrastructure and job training, envisions annual U.S. deficits in the $400 billion to $600 billion range over the next 10 years.

It stands in stark contrast to the Republican budget now being debated in the House, which calls for deep cuts to social programs to reach a small surplus by 2023.

The budget blueprint does not carry the force of law, but sets a starting point for a new set of fiscal negotiations that could come to a head by early August, when current U.S. borrowing authority will be exhausted.

(Reporting by David Lawder; Editing by Vicki Allen)

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Bill to avert government shutdown inches to Senate passage

By Richard Cowan

WASHINGTON (Reuters) - The Senate on Monday inched closer to passage of a bill to fund federal agencies through September 30 and avoid a government shutdown at the end of this month when existing money runs out.

Racing against a March 27 deadline, senators voted 63-35 to limit debate on the legislation so that it can be approved and sent to the House of Representatives for final approval this week.

A Senate vote on passage could come as early as Tuesday.

Just before the procedural vote, Senate Majority Leader Harry Reid, frustrated by the slow pace, urged his colleagues to let the legislation move ahead.

"There is a big spotlight on the United States Senate to see if we can do something," Reid said, adding, "I'm asking senators here to give up a few things for the greater good." He was referring to the 125 or so time-consuming amendments that senators had circulated, which were slowing passage of the legislation.

Notably, the bill retains $85 billion in controversial spending cuts that began on March 1. This is the first big installment on a 10-year, $1.2 trillion deficit-reduction plan that has virtually every U.S. agency worried, from the Defense Department to the Education Department and NASA.

As originally passed by the House, this short-term spending bill would give the Pentagon some flexibility in how it carries out its half of the $85 billion in spending cuts.

Senate Democrats are trying to expand that flexibility to some non-defense government agencies.

With the Senate and House scheduled to begin a two-week spring break on Friday, the March 27 deadline effectively was moved up to the end of this week.

The $85 billion in spending cuts were supposed to be applied evenly throughout the government and were intended to be so universally painful to Republicans and Democrats that they would find an alternative.

That has not yet happened and so lawmakers were resigned to the $85 billion in cuts staying in place, but at the same time were using the short-term funding bill to try to protect programs particularly important to their home states.

AIRPLANES AND CHICKENS

Even fiscal conservatives who have made deep government spending cuts their top priority, had been looking for ways to negate some of the spending cuts.

For example, Republican Senator Pat Toomey tried to shield from layoffs hundreds of civilian contractors working at a huge Defense Department maintenance facility in his home state of Pennsylvania.

Meanwhile, Senator John Boozman joined up with Senator Mark Pryor, both of Arkansas, and other senators to stop the Federal Aviation Administration from closing air traffic control towers in rural states. Four such towers in Arkansas could be shuttered by the spending cuts known as "sequestration."

Democratic Senator Chris Coons of Delaware, home to a large poultry industry, was part of an effort to stop the spending cuts from furloughing government food inspectors who are needed to keep slaughterhouses and other food facilities operating.

It was not clear which, if any, of these amendments ultimately could be incorporated into the bill.

As Congress attempted to work cooperatively to pass the short-term spending bill and avert a government shutdown, there was no such bipartisanship on U.S. budget priorities for fiscal 2014, starting on October 1, and beyond.

Republicans were stressing the need to balance the U.S. budget in 10 years, while Democrats were calling for less ambitious deficit-reduction and more emphasis on creating jobs in a slow-growing economy.

The Republican-controlled House this week was set to pass a budget aimed at erasing deficits by 2023 through deep cuts to social programs such as Medicaid healthcare for the poor. The fiscal blueprint, crafted by House Budget Committee Chairman Paul Ryan, also would restructure Medicare healthcare for the elderly and disabled.

A large group of conservative Republicans on Monday unveiled their budget vision: growth in defense spending at the same pace as the Ryan budget, but deeper cuts to other domestic programs by freezing them at levels spent in 2008 for the next four years.

This alternative is not expected to pass the House. Neither is a House Democratic alternative, which aims to cancel the $1.2 trillion in automatic spending cuts and replace them with more targeted savings, while also spending $200 billion for job creation.

Also this week, the Democratic-controlled Senate is expected to debate and pass its fiscal 2014 budget blueprint, claiming $1.85 trillion in deficit-reduction over a decade through an equal mix of spending cuts and tax increases.

A compromise budget plan, if one is possible this year, might be a few months away as President Barack Obama and Republicans in Congress could joust through July over spending cuts and tax increases. By late July or early August, Congress must confront the need to raise U.S. borrowing authority or risk a first-ever government default. The budget talks are likely to become intertwined with the debt limit debate.

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Congress moving swiftly to avoid government shutdown

WASHINGTON (Reuters) - Congress is moving rapidly to pass legislation funding the federal government through September 30, as Senate leaders on Tuesday expressed eagerness to avoid any threat of agency shutdowns when money runs out on March 27.

"I'm cautiously optimistic we're going to reach a solution before we leave here for the Easter recess," which is scheduled to begin on March 23, Senate Majority Leader Harry Reid told reporters on Tuesday.

Reid's Republican counterpart, Senator Mitch McConnell, gave a similarly upbeat assessment, telling reporters, "There seems to be no interest on either side in having a kind of confrontational government shutdown scenario."

Their comments follow Republicans' introduction of a new funding bill in the House of Representatives that will keep in place $85 billion worth of controversial, across-the-board spending cuts triggered on Friday.

The House measure, expected to win passage on Wednesday, aims to partially shield some defense and veterans' programs from the indiscriminate cuts by including two updated military-related spending bills. It also will shift some funds to security-related efforts such as border and embassy security, prisons and FBI operations.

Senator Barbara Mikulski, the Democrat who chairs the Senate Appropriations Committee, expressed frustration with the lack of flexibility for domestic programs such as education in the Republican plan.

"It's only guns. We need butter," Mikulski told reporters.

The White House also said it was concerned that domestic agencies would be forced to operate under older, more restrictive spending. In a statement, it said it would work with Congress to "refine the legislation" and would keep pressing lawmakers for a replacement to the automatic sequester cuts.

Next week, Senate Democrats will move their version of the bill for a vote and are likely to add funding flexibility for some domestic programs, party aides said.

Both the House and Senate versions are expected to cap discretionary spending at $1.043 trillion for the full 2013 fiscal year, but this would be reduced to around $982 billion if the sequester cuts remain in place.

PICKING THEIR BATTLES

Over the past couple of years, these short-term government funding bills, called "continuing resolutions," have been used as leverage by Republicans to try to lower spending. Amid Democratic resistance to some of the deeper spending cuts sought by Republicans, there were fears that negotiations would break down, forcing widespread shuttering of government agencies.

With House Republican conservatives feeling more confident now that they have locked in the $85 billion in new savings for the next seven months, the appetite for yet another showdown seems to have waned.

"What remains to be seen is whether this move ... apparently away from a crisis, is truly a shift in strategy for Republicans, or just a short break from extremism that they've had over the last few years," Reid said.

Once the funding bill for the remainder of this fiscal year is enacted, Congress promptly will turn to its next fiscal battle: a budget blueprint for the next fiscal year that begins on October 1.

Republican House Budget Committee Chairman Paul Ryan next week is expected to release an ambitious budget blueprint that aims to achieve balance in 10 years. But to achieve this, he may have to row back on at least one promise he made last year as the Republican vice presidential candidate - that any cuts to the Medicare health program will not affect anyone 55 or under.

He has floated a plan to push the age threshold up to 56 to reap additional savings from the program.

And sometime this summer, Congress and President Barack Obama will be engaged in yet another fight over the need to raise the U.S. Treasury Department borrowing limit.

It is unclear whether either of these measures will bring Democrats and Republicans together on a long-term deficit-reduction deal.

(Editing by Jackie Frank)

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Republicans move to avoid government shutdown

WASHINGTON (Reuters) - Congressional Republicans announced a plan on Monday to avoid a government shutdown later this month, seeking to calm the waters after months of budget fights that ended in a failure last week to halt damaging spending cuts.

Just three days into the $85 billion of automatic "sequester" cuts, Republicans in the House of Representatives turned their attention to the next fiscal deadline: the March 27 expiration of funding for government agencies and programs.

Should Congress fail to pass a new spending measure, the government will have to shut down most agencies and services - from national parks to the Federal Aviation Administration.

That would pile even more uncertainty onto the economy just as the worst effects of the sequester cuts begin to take effect in April.

After bruising encounters last year over the fiscal cliff of broad tax increases and spending cuts, and now sequestration, both Republicans and Democrats in Congress have lost some of their appetite - at least temporarily - for more confrontation and want to get through March without having to fight about how to keep government funded.

The bill gives some relief to the Defense Department, military construction and the Veterans Administration, but Democrats complained that it does not do enough to help domestic programs also hit by the sequester cuts that started Friday.

Sounding conciliatory, President Barack Obama said he was not giving up on trying to work with Republicans to reduce the deficit.

"I will continue to seek out partners on the other side of the aisle so that we can create the kind of balanced approach of spending cuts, revenues, entitlement reform that everybody knows is the right way to do things," he said at the start of a cabinet meeting.

In phone calls with lawmakers at the weekend, Obama raised anew the issue of cutting entitlements such as Medicare and Social Security as a way out of the budget cuts. Reforming the social safety net is a pet project of Republicans.

AIRPORT DELAYS

The Republican bill on Monday, authored by House Appropriations Committee Chairman Hal Rogers, would prevent a government shutdown by extending funding through the end of the fiscal year on September 30.

But it envisages keeping the automatic spending cuts in place, drawing criticism from Democrats that it only deals with a small part of Washington's budget woes.

The fiscal crisis that has been going for months took its most serious turn yet last week when the automatic spending cuts came into force on Friday night because the two parties could not agree on what to replace them with.

Hundreds of thousands of federal government employees face furloughs, although many will not begin until early April.

But Secretary of Homeland Security Janet Napolitano advised airline passengers to get to airports early because the cuts have already led to long lines at some security checkpoints.

Napolitano said delays were up between 150 percent and 200 percent at certain airports. The Customs and Border Protection agency began reducing overtime over the weekend.

"Lanes that would have previously been open due to overtime staffing were closed, further exacerbating wait times at airports with typically longer international arrival processes," the agency said.

In Chicago O'Hare International Airport's arrivals terminal, Dave Wagner, 51, of Boston and his brother John, 48, of Chicago, arrived late Monday morning on a flight from Hong Kong. It took them an hour to clear customs and the wait appeared to be growing. "It should have taken maybe 15 or 20 minutes," said Dave Wagner. "But there was only one agent for 12 lines."

The Pentagon is the government department hardest hit by sequestration. The House Republican bill gives it some respite by allowing it to shift funds to away from outdated, unwanted projects to critical, front-line activities.

"The legislation will avoid a government shutdown on March 27th, prioritize DoD and Veterans programs, and allow the Pentagon some leeway to do its best with the funding it has," Rogers said in a statement.

The Pentagon would be allowed to spend about $10 billion more on operations and maintenance than under a straight extension of previous funding that keeps money locked in unwanted accounts. This will help it maintain training and readiness and provide Republicans a way to shield the military from some of the cuts.

Accounting for the sequester cuts, the Republican bill would reduce the full-year discretionary spending levels to $982 billion, compared to $1.043 trillion previously.

But domestic programs, such as education funding and transportation security would be stuck with outdated extensions of spending authority passed 15 to 18 months ago, limiting their ability to shift funds.

"We need to have programs in there that meet compelling human need, housing, education, health care. And we also need to look at transportation," Barbara Mikulski, the Democrat who chairs the Senate Appropriations Committee, told CNN on Friday.

Republican House aides said the measure faced reduced chances of passage if additional appropriations bills for domestic programs were attached to it.

The Republicans' measure also steers some new funds to certain security efforts without increasing the overall spending cap. These include nuclear weapons modernization, FBI staffing levels and cybersecurity programs, border protection and federal prisons. It would also provide another $2 billion above the current level for embassy security after last year's attacks on a U.S. diplomatic mission in Benghazi, Libya.

(Additional reporting by Roberta Rampton and Deborah Charles in Washington and James B. Kelleher in Chicago; Editing by Tim Dobbyn)

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