Congress Approves Temporary Budget Bill, Avoids Shutdown

Senate Majority Leader Harry Reid
Senate Majority Leader Harry Reid, a Democrat from Nevada. Photographer: Brendan Hoffman/Bloomberg

The U.S. Congress approved a budget bill that will prevent a government shutdown for now while lawmakers negotiate over Republican demands to further cut federal spending this year.

The Senate voted 91-9 to send the measure to President Barack Obama, who signed it this afternoon. The bill, which reduces spending by $4 billion, passed the House yesterday by a 335-91 vote. Current government spending authority would expire March 4 and the legislation extends that to March 18.

“We’re going to keep working toward a solution” for the rest of this fiscal year, which ends Sept. 30, Senate Majority Leader Harry Reid said before the vote. “This time around it may not include everything Democrats want or everything the Republicans want, but we need to have a compromise.”

Democrats had sought a monthlong extension to give lawmakers more time to work out their differences on funding agencies for the next seven months.

Obama said in a statement he was pleased with today’s extension while adding: “Living with the threat of a shutdown every few weeks is not responsible, and it puts our economic progress in jeopardy.”

The president called on congressional leaders of both parties to meet with Vice President Joe Biden, White House Chief of Staff William Daley and Budget Director Jack Lew to work on a longer-term budget agreement.

$61 Billion Reduction

House Speaker John Boehner didn’t immediately accept Obama’s invitation to talks.

“It’s time” for Senate Democrats to outline their position, Boehner of Ohio told reporters. “Americans have a right to know, where is the Democrats’ plan?”

Lawmakers will have significant issues to resolve. The House last month approved a Republican plan to cut $61 billion from 2011 government spending, which would mean reductions of 10 percent or more in hundreds of programs. Democrats say those cuts would go too far and would harm the economic recovery.

Also in dispute are a number of policy items -- such as a ban on funds for Obama’s health-care overhaul and for Planned Parenthood -- that House Republicans attached to the longer-term budget bill.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, said the agreement on the short-term measure was “a small step, but it’s a step in the right direction.”

‘Superhuman Effort’

Reid said today he was pleased that Biden will be taking a role in negotiations. Dick Durbin of Illinois, the second-ranking Senate Democrat, said it will take a “superhuman effort” to agree on a spending bill for the rest of the year in the next two weeks.

The Senate yesterday approved legislation that would cut off pay to lawmakers and the president if the government shuts down, an effort to spur compromise on spending levels. Senator Barbara Boxer, a California Democrat, said it wasn’t fair that current law would allow lawmakers to continue receiving paychecks even as other federal employees stopped getting salaries.

Earlier today, Federal Reserve Chairman Ben Bernanke told a House committee that the Republicans’ $61 billion budget-cutting bill would result in the loss of a “couple of hundred thousand jobs,” less than the 700,000 jobs predicted by Moody’s Analytics chief economist Mark Zandi.

Goldman Sachs

Last week, a Goldman Sachs report said the Republican proposal would reduce economic growth by 1.5 to 2 percentage points during the second and third quarters of this year.

Republicans, trying to pressure Democrats to agree to big cuts, pointed to a Government Accountability Office report released yesterday that described scores of duplicative and wasteful federal programs. According to the report, 15 agencies oversee food-safety laws, at least four departments administer 80 economic development programs, and the Department of Transportation runs more than 100 highway, rail, safety and transit programs.

“This report confirms what most Americans assume about their government,” said Senator Tom Coburn, an Oklahoma Republican. “This report also shows we could save taxpayers hundreds of billions of dollars every year without cutting services.”

The $4 billion spending cut in the stopgap spending bill would carve $1.3 billion out of the budget by canceling unspent highway funding and cutting four Department of Education programs, a broadband program and state-election grants. The Obama administration proposed those changes in its budget request last month.

Pet Projects

The rest of the $4 billion in savings would come by rescinding unspent money for lawmakers’ pet projects, which both parties have said they will abandon.

The plan would cut spending at the same rate as the $61 billion proposal, allowing Republicans to say they are making progress on keeping campaign promises to roll back non-security discretionary spending to 2008 levels. The measure was opposed in the House by six Republicans and 85 Democrats.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE