Senate to Consider Government Funding Bill Next Week

The Senate will consider a measure next week to fund the U.S. government through September after the House passed its plan to avoid a shutdown and preserve new spending cuts.

The Senate plans to build on legislation passed by the House yesterday to keep the government operating after current spending authority expires March 27. The House measure would give the Defense and Veterans Affairs departments more leeway to decide how to implement the automatic spending reductions, known as sequestration.

Senate Democrats are seeking a bipartisan agreement to give more spending flexibility to additional agencies, including Commerce, Agriculture, Justice and Homeland Security, said Appropriations Committee Chairwoman Barbara Mikulski.

The House measure “is too limited,” she told reporters today in Washington. Mikulski, a Maryland Democrat, said she is trying to negotiate an agreement with the committee’s top Republican, Alabama Senator Richard Shelby, to add specific spending language for programs that are “relatively free of controversy.”

Shelby told reporters he supports Mikulski’s attempt to give all government agencies flexibility to move money between spending accounts as they implement the spending cuts.

“That’s a lot better than a meat-ax approach,” he said.

Both parties and President Barack Obama have said they want to reach an agreement in time to keep the government operating.

March 11

Mikulski said she plans to introduce the measure on March 11 to give Senate leaders time to seek a vote next week. She said the Senate bill would continue the automatic spending cuts that started March 1.

The Republican-led House passed the stopgap measure on a 267-151 vote yesterday.

“ I would urge Democrat leaders in the Senate to not get greedy and get carried away and try to put forward a possibility of a government shutdown,” House Speaker John Boehner, an Ohio Republican, told reporters today. “Our goal here is to cut spending, not to shut down the government.”

Asked about the speaker’s comments, Mikulski said Senate Democrats aren’t being “provocative or pugilistic, but at the same time we have Democratic priorities.”

In a reminder of budget disputes to come, Boehner reiterated today he would insist on dollar-for-dollar spending cuts for an increase in the U.S. debt limit. Federal borrowing authority is scheduled to expire May 19.

Automatic Cuts

The House measure retains $85 billion in automatic cuts that began March 1 -- a reduction of 5.8 percent through the fiscal year ending Sept. 30. It would finance the government at an annual rate of about $982 billion.

Senate Republican Leader Mitch McConnell of Kentucky told reporters March 5 there is “a sense of urgency and cooperation on both sides” to agree on legislation that can pass the House and Senate.

“There seems to be no interest on either side in having a kind of confrontational government shutdown scenario,” McConnell said.

Still, two Senate Republicans, Mike Lee of Utah and Ted Cruz of Texas, said they would seek to delete provisions that finance the Obama administration’s implementation of the health- care overhaul set to take effect in 2014. McConnell said he would support Cruz’s amendment.

Delaying Tactics

Such an effort may delay a vote on the bill. Reid would need 60 votes to overcome Republican delaying tactics and complete debate on the measure.

Oklahoma Republican Tom Cole said during House floor debate yesterday that the House measure would cut spending by “2.4 percent of the entire $3.5 trillion federal budget.”

“We are willing to renegotiate where those cuts come from,” Cole said.

The automatic budget reductions, if they remain in place, will cause a 0.6 percentage-point reduction in U.S. economic growth this year, the nonpartisan Congressional Budget Office has estimated. Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee on Feb. 26 that “this additional near- term burden on the recovery is significant.”

Investors haven’t been deterred so far. The Dow Jones (INDU) Industrial Average climbed to another record today, rising 33.40 points, or 0.2 percent, to 14,329.64. The Standard & Poor (SPX)’s 500 Index added 0.2 percent to 1,544.33, the highest level since Oct. 31, 2007, at 4 p.m. in New York.

Treasury Yields

Treasury 10-year note yields increased six basis points, or 0.06 percentage point, to 1.99 percent at 3:16 p.m. in New York, according to Bloomberg Bond Trader data.

New York Representative Nita Lowey, the House Appropriations Committee’s top Democrat, said in a statement opposing the bill that the spending cuts preserved in it “will result in job losses and furloughs, slowed economic growth” and reduced government services.

The House bill would give the Defense Department an extra $10 billion to train troops, maintain weapons and pay for operations. It would let the department transfer as much as $4 billion between accounts for purposes such as “unforeseen military requirements,” with advance notice to Congress.

It provides additional money for the Energy Department to continue modernizing the nation’s nuclear weapons to ensure their safety and reliability.

More Funding

The stopgap measure would ensure that the Federal Bureau of Investigation and the U.S. Border Patrol won’t have to furlough or fire agents. Another provision would provide more money to the Interior Department and the Forest Service to fight wildfires on drought-stricken federal lands.

The House bill would cancel a 0.5 percent pay raise for federal civilian employees scheduled to take effect in April, the first time the federal pay schedule was to be increased since 2010. The provision, opposed by Democrats, is expected to save $11 billion over 10 years, Republicans have said.

To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; James Rowley in Washington at jarowley@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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