US congress passes budget deal

Compromise deal authorises $38bn in spending cuts, but deep divisions remain among lawmakers on fiscal policy.

    The United States congress has approved a budget deal, struck last week between Democrats and Republicans, over spending cuts by the government.

    The senate voted 81-19 to pass the measure after the House of Representatives approved it by a 260-167 margin early on Friday.

    The bill will now be sent to Barack Obama, the US president, to sign into law.

    The fight over the extent of cuts had almost brought the government to the brink of shutdown until an eleventh-hour compromise between the US president and congressional leaders to cut $38.5bn in spending for the current fiscal year was reached.

    The White House highlighted how support from both its Democratic allies and Republican foes had ensured passage of the bill, which funds the US government through September 30, ahead of what may be far more divisive battles.

    "There are tough challenges ahead, from growing our economy to reducing our deficit, but we must build on this bipartisan compromise to tackle these issues and meet the expectations of the American people," Jay Carney, White House spokesman, said.

    However, mass defections in both parties on the issue have highlighted major concerns in the road ahead for decisions on budget cuts and debt reduction.

    All-round criticism

    Approximately one-fourth of Republicans and more than half of the Democrats in the House opposed the deal, with Republicans arguing that the cuts were not deep enough, and Democrats fearing that lower-income Americans would be adversely affected by them.

    The divisions in party ranks appear to be indicative of deep disagreements on questions of economic policy.

    John Boehner, the Republican speaker of the House of Representatives, and Obama are concerned, given the impending votes on raising the US debt limit from its current level of $14.3 trillion, and passing the 2012 fiscal year budget.

    Boehner had been under pressure to show that he could get the 218 votes needed to pass the budget deal without any Democratic support, but he fell short.

    "Listen, this bill is not perfect. No cause for celebration. This is just one step," Boehner said at a press conference before the vote, promising "there's more to come."

    The deal made large cuts in overseas food aid, the US state department budget and environmental programmes, but also boosted military spending.

    After the vote on the deal, the House began debate on a Republican budget plan for the 2012 fiscal year, which begins on October 1. They have proposed deeper spending cuts and lower tax rates in order to cut $6bn over the next 10 years.

    Aiming for deficit cuts

    In a speech on Wednesday, Obama made long-term debt reduction a priority, calling for cutting $4tn out of the budget deficit over 12 years, ensuring that the issue will be a prime focus during his 2012 presidential re-election campaign.

    The US treasury says that the government is likely to hit its current debt limit by May 16, but that payments could be juggled in order to avoid a default until around July 8.

    Obama and Boehner have been criticised by both conservative Republicans and liberal Democrats who have been unhappy with the compromises made in order to reach the final budget deal.

    "There are going to be some areas where we don't agree, but we can get a process going," Obama told ABC News in an interview. "And some of it will be settled by the American people in the election."

    The House vote on the deal came after the non-partisan Congressional Budget Office [CBO] report estimated that its actual impact would fall short of the $38.5bn promised.

    The CBO said that spending would only actually be reduced by $20 to $25bn over the coming years.

    Further, it said that once the costs of the wars in Afghanistan and Iraq are factored in, the US budget deficit, which was supposed to decrease as a result of the deal, will actually increase by $3.3bn.

    SOURCE: Agencies


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