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FT.com
US Congress strikes bipartisan budget deal
By James Politi in Washington

US budget negotiators on Tuesday night struck a bipartisan deal to set spending levels until 2015, breaking the latest fiscal logjam in Congress and stopping a cycle of crisis-driven economic policy making in Washington.

The agreement is small in size – worth $85bn – but may herald the return of an era in which Congress can perform basic functions without the political brinkmanship that has repeatedly threatened the US economic recovery in recent years.

It will increase spending in the near term, easing the pain of “sequestration” budget cuts that began in March and drew the criticism of the International Monetary Fund for the austerity hit they imposed on many US government agencies.

I think this agreement is a clear improvement on the status quo” said Paul Ryan, the former Republican vice-presidential candidate and chairman of the House budget committee. “It makes sure we don’t lurch from crisis to crisis,” he said on Tuesday night.

President Obama said in a statement that the deal was a “good first step” and asked Congress to pass it “so I can sign it into law and our economy can continue growing and creating jobs without more Washington headwinds”.

If the deal is approved by Congress, it would be likely to avert a government shutdown in mid-January and again at the start of the next fiscal year in October 2014.

It does not entirely eliminate the potential for a new budget crisis, however, since it does not increase the US debt limit. New borrowings will have to be approved by Congress early next year, a process that has often been fraught under the Obama White House.

The rise in spending levels over the next two years to replace “sequestration” will be worth $63bn, to be paid for by increased fees on airline travellers, and higher contributions to pensions for federal workers, including the military.

It will significantly loosen the belt on US government department and agencies ranging from the Pentagon to the National Institutes of Health and the Environmental Protection Agency.

Over a decade, the agreement will reduce the US deficit by more than $20bn since the deal adds new cuts to healthcare providers for seniors, such as hospitals, over the long-term.

Even as the deal appeared, it faced some opposition from both left and right which could spell problems in its passing through Congress. Votes are expected in the House of Representatives later this week, to be followed by the Senate.

Americans for Prosperity, a conservative group associated with the billionaire Koch Brothers, had urged Republicans to vote against the emerging deal.

The American people demanded, and were promised, reasonable spending limits. Politicians choosing to go back on their promise will be held accountable for their actions,” said Tim Phillips, president of AFP, in a statement on Tuesday before the deal was released.

Republicans should once again stand firm in upholding the modest sequestration spending cuts,” Mr Phillips added...

Read the rest of the article at FT.com



 
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