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 Republican-controlled House, on a 267-151 vote, yesterday passed a stopgap measure to keep the government operating after current spending authority expires March 27. The bill goes to the Democratic-led Senate, where Majority Leader Harry Reid of Nevada signaled that it will be altered to reflect priorities he didn’t identify.

“ 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 in Washington today. “Our goal here is to cut spending, not to shut down the government.”

The Senate will take up the issue next week, Reid said March 5. Both parties and President Barack Obama have said they want to reach an agreement in time to keep the government operating.

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. Boehner called the measure “straightforward and reasonable” in a statement after House passage.

The House-passed legislation would finance the government at an annual rate of about $982 billion. It would give the Defense and Veterans Affairs departments more leeway to decide how to implement the automatic spending reductions, known as sequestration.

The Senate Appropriations Committee, led by Barbara Mikulski, a Maryland Democrat, is seeking in its bill to provide the same level of funding while giving flexibility in spending to additional government agencies.

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.

‘Confrontational’ Scenario

“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 next year.

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.

Georgia Republican Austin Scott said he supported the House measure even though some of the cuts are “not exactly where we would like to see some of them.” Scott was first elected in 2010 on the wave of anti-tax Tea Party support that swept his party into a House majority.

‘Stability’ Important

“Stability right now is more important than anything else,” Scott said. “It gives our military the ability to deal with the sequestration in a more efficient manner,” he said in an interview.

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 Industrial Average reached another record high today, rising 45.92 points, or 0.3 percent, to a record 14,342.16. The Standard & Poor’s 500 Index added 0.2 percent to 1,544.79 at 11:43 a.m. in New York.

Treasury 10-year note yields increased four basis points, or 0.04 percentage point, to 1.98 percent at 11:32 a.m. in New York, according to Bloomberg Bond Trader data.

Vote Breakdown

The House passed its bill, H.R.933, with support from 214 Republicans and 53 Democrats, while 137 Democrats and 14 Republicans voted against it.

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.

Additional Funding

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

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.

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