Congress inches back from budget shutdown abyss

WASHINGTON Sun Feb 27, 2011 2:07pm EST

A copy of President Obama's 2012 budget is unveiled on Capitol Hill, February 14, 2011. REUTERS/Jason Reed

A copy of President Obama's 2012 budget is unveiled on Capitol Hill, February 14, 2011.

Credit: Reuters/Jason Reed

WASHINGTON (Reuters) - Playing for time to overcome a deep partisan impasse over the budget, senior lawmakers backed away on Sunday from a possible government shutdown.

Washington will run out of money on Friday and non-essential services will halt unless action is taken. A short-term fix to buy time seemed increasingly likely.

Amid concern about damaging the fragile economic recovery, Republican House Speaker John Boehner said lawmakers have "a moral responsibility" to address the huge U.S. budget deficit.

"That means working together to cut spending and rein in government -- not shutting it down," he said in remarks to be delivered to a religious broadcasters' convention.

"This is very simple: Americans want the government to stay open, and they want it to spend less money. We don't need to shut down the government to accomplish that," Boehner said.

He said the House will pass a short-term bill that will keep the government running with some cuts, Boehner said.

It remained to be seen if Boehner's appeal would restrain deficit hard-liners among Tea Party Republicans in the House, and whether the Democratic-controlled Senate will be able to act quickly enough with time running out for a short-term fix.

The U.S. budget deficit is forecast this year to hit $1.65 trillion, a level of red ink that has world markets concerned and U.S. voters demanding change, though many balk at specific proposals for cuts in popular programs and tax changes.

President Barack Obama on Saturday urged Congress to find "common ground" on spending cuts to prevent a shutdown.

"We're very focused on trying to avoid a shutdown," said Representative Chris Van Hollen, the top Democrat on the House Budget Committee, in a C-SPAN TV interview on Sunday.

He said he was "cautiously optimistic" that a shutdown will be averted. He said cooler heads appeared to be prevailing among Republicans for the moment. "That doesn't mean we won't be right back here three weeks from now," he added.

TWO-WEEK STOPGAP

House Republicans on Friday detailed $4 billion in spending cuts for a two-week stopgap bill, which the leader of the Democratic-controlled Senate indicated could be acceptable.

That would give Congress time to work on a plan to fund the government through the fiscal year that ends on September 30.

The House Republicans' stopgap would continue funding for two weeks for all programs, except some already targeted by Obama in his budget plan for fiscal 2012 beginning on October 1.

"That's clearly headed in the right direction," Senate Budget Committee Chairman Kent Conrad, a Democrat, said on CNN's "State of the Union" program, of the $4 billion in cuts.

But Conrad urged a broader and longer deal on the deficit, which most experts say cannot be addressed without changes in the tax code and to entitlement programs such as the Medicare.

"This two-week business is not the way to go," he said. "The big problem is we're focusing on just a small part of the budget, only 12 percent of the budget is being considered for reduction and if we're going to ultimately solve this problem we're going to have to do much more."

The House earlier this month passed a Republican measure to slash $61 billion through September from domestic programs, excluding the Social Security pension program and the Medicare and Medicaid health programs for the elderly and poor.

Senate Democrats said the House bill would gut social and environmental programs and called it a non-starter. Investment firm Goldman Sachs estimated it would significantly slow U.S. economic growth in the second and third quarters.

(Editing by Eric Beech)

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