Budget Deal Easing $63 Billion in Cuts Advances in Senate

Photographer: Andrew Harrer/Bloomberg

President Barack Obama in Washington, D.C., on Dec. 3, 2013. Close

President Barack Obama in Washington, D.C., on Dec. 3, 2013.

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Photographer: Andrew Harrer/Bloomberg

President Barack Obama in Washington, D.C., on Dec. 3, 2013.

The U.S. Senate cleared and sent to President Barack Obama the first bipartisan budget produced by a divided Congress in 27 years, resolving for now spending issues that had helped spur a government shutdown in October.

The $1.01 trillion budget deal passed 64-36 today eases $63 billion in automatic spending cuts, raises user fees and lowers the U.S. deficit over 10 years. The plan keeps in place about half of the reductions known as sequestration for next year, and about three-quarters of the planned cuts for 2015.

Nine Republicans joined all Democrats to back the measure.

Neither party liked the cuts, which in January would have pinched Pentagon spending as well as domestic programs. Neither party could find a way to erase them all in this compromise, which does little to address the nation’s $17 trillion debt.

“It is not going to solve every problem but it is a step in the right direction and a dramatic improvement over the status quo,” Senator Patty Murray, a Washington Democrat who helped craft the budget, said before the vote. “The American people are sick and tired of the constant crises we see out of Washington.”

The deal crafted by Murray and Representative Paul Ryan, a Wisconsin Republican, doesn’t include tax increases Republicans oppose or entitlement-program changes that Democrats resist. It will help prevent another government shutdown for the next two years, and Obama said he will sign it into law.

‘Small Step’

“This vote shows both parties -- in both chambers -- can find common ground,” Ryan said after the vote. “This bill is only a small step. We need to do a lot more. But it’s a small step in the right direction.”

The deal sets discretionary spending at $1.01 trillion for this fiscal year, higher than the $967 billion in the 2011 budget plan, leading some Republicans to vote against it. It raises fees, including for airline passengers, and cuts the budget deficit by $23 billion over 10 years.

Senate Republicans Saxby Chambliss and Johnny Isakson of Georgia, Susan Collins of Maine, Orrin Hatch of Utah, John Hoeven of North Dakota, Ron Johnson of Wisconsin, John McCain of Arizona, Lisa Murkowski of Alaska and Rob Portman of Ohio voted with Democrats for the bill.

Senators Lamar Alexander of Tennessee, Roy Blunt of Missouri and Jeff Flake of Arizona, who voted yesterday to advance the measure for a vote, opposed final passage.

‘Rip Off’

“This budget may be a deal for Democrats and progressive Republicans, but it’s a rip-off for citizens,” FreedomWorks President Matt Kibbe said. “Congress is once again raising taxes and spending now, for reductions promised later that will never materialize.”

Lawmakers plan to make a technical correction to the law after passage to ensure that disabled veterans aren’t hurt by a rollback in military pension benefits, Murray said today on the floor. Republican Senators Lindsey Graham of South Carolina, Roger Wicker of Mississippi and Kelly Ayotte of New Hampshire had complained that the law cut benefits of veterans forced to retire as a result of injuries.

The House on Dec. 12 passed the plan 332-94, with backing from 73 percent of Republicans and 82 percent of Democrats.

The last time Congress reached a budget agreement with the two chambers run by separate parties was in 1986, when Democrats controlled the House and Republicans ran the Senate.

Immigration, Trade

Lawmakers should “build upon this agreement by moving forward with comprehensive tax reform, lifting the debt ceiling, reforming immigration and passing updated Trade Promotion Authority legislation to advance U.S. trade agreements,” Randall Stephenson, AT&T Inc. chief executive officer and chairman-elect of the Business Roundtable, said in a statement. The group represents CEOs of major U.S. companies.

Congress must now pass legislation by Jan. 15 that spells out the spending plans to avert a second government shutdown in four months. Lawmakers have begun drafting an omnibus appropriations bill that will implement the budget accord.

Senate Appropriations Committee Chairwoman Barbara Mikulski of Maryland told fellow Democrats during a closed-door meeting yesterday that she plans to have a catchall spending bill ready for lawmakers to consider when they return to Washington in January, Reid said.

“She’s going to work during the Christmas break, all the subcommittees will work and when we come back, she believes we will have an omnibus,” Reid said.

Debt Limit

The plan leaves the door open to a possible fight over raising the debt limit as U.S. borrowing authority is set to lapse in February.

Congress suspended the debt limit through Feb. 7 as part of a deal to end a partial shutdown in October. After that date, the government can use so-called extraordinary measures to prevent missed payments. Treasury Secretary Jacob J. Lew has said those steps can last for about a month.

Republican leaders are considering several proposals they want to include with a debt-limit increase, including a delay or repeal of the individual mandate in the health-care law and energy and tax-code changes. Republicans probably will set their plans after an annual policy retreat in late January.

“This is not something to be trifled with,” White House press secretary Jay Carney said today about raising U.S. borrowing authority. “It is not something to be horse-traded over. It’s the full faith and credit of the United States.”

Some Republicans balked at supporting the budget measure because the accord pushes savings into future years and includes the user fees that some groups are labeling a tax increase.

Medicare Payments

Much of the deficit reduction will come in later years, according to an analysis by the nonpartisan Congressional Budget Office. The plan would lower the deficit by $3.1 billion in 2014 and $3.4 billion in 2015 and exceed $20 billion a year in 2022 and 2023, the CBO said.

A big portion of the savings is tied to extending the cuts in Medicare provider payments into 2022 and 2023, rather than letting them expire in 2021 as under current law.

The accord spared doctors for three months from cuts in the Medicare reimbursement rates set to start in January. The measure doesn’t extend emergency benefits for 1.3 million unemployed workers, an omission that frustrated Democrats, who say they plan to continue the fight in January.

It doesn’t continue more than 50 tax breaks that will lapse on Dec. 31 including the research and development tax credit used by companies such as Intel Corp. (INTC)

Senator Jeanne Shaheen, a New Hampshire Democrat, said she wants to replace the provision cutting military pensions, worth $6 billion, that takes effect in two years. Shaheen introduced a bill that would replace the cost-of-living benefit cuts by ending a tax break used by U.S. companies with overseas addresses to avoid paying taxes.

To contact the reporters on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net; Heidi Przybyla in Washington at hprzybyla@bloomberg.net

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

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