WRAPUP 2-U.S. House averts government shutdown, backs Ryan budget

Thu Mar 21, 2013 6:12pm EDT

* U.S. agencies, programs funded through Sept. 30

* No government shutdown next week, budget fights eased

* Arguments shift to Republican, Democratic budget plans

By David Lawder

WASHINGTON, March 21 (Reuters) - The U.S. House of Representatives eliminated the threat of a government shutdown next week, approving on Thursday a stop-gap funding bill that eases partisan tensions after months of bitter fights over budgets.

In a rare show of cooperation, the Republican-controlled House voted 318-109 to approve legislation that keeps government agencies and programs funded through the end of the fiscal year on Sept. 30.

The debate over how to reduce the deficit will now focus on rival budget plans for fiscal 2014, that begins Oct. 1, put forward by Republicans and Democrats.

While the two parties' proposals are vastly different, lawmakers were encouraged by the bipartisan collaboration shown in avoiding a damaging government shutdown.

Both parties have been chastened by bruising budget fights like the "fiscal cliff" negotiations that went down to the wire in January, and the failure by Congress and the White House in February to halt automatic spending cuts.

"We proved that when we set our mind to it, we can get complicated, hard things done," said House Appropriations Committee chairman Harold Rogers, a Kentucky Republican.

He called the vote a "good start" before lawmakers get down to tackling separate budget proposals in the coming days.

Current spending authority was to expire on March 27, but Republicans chose not to use the threat of federal agencies running out of money and shutting down as leverage to demand deep spending cuts.

Instead, they want to wage a campaign for deficit reduction centered on proposals from House Budget Committee Chairman Paul Ryan of Wisconsin.

Shortly before approving the spending bill, the House backed a budget blueprint offered by Ryan to eliminate U.S. deficits within 10 years through deep cuts in healthcare and spending on other social safety net programs.

The funding bill for the rest of this fiscal year, which the Democratic-led Senate approved on Wednesday, keeps in place $85 billion in automatic spending cuts, known as the "sequester."

But it takes some of the sting out of those cuts by allowing the military and several domestic agencies to shift some money within their reduced budgets to higher priority activities.

The Defense Department, for example, will be able to shift to operations and maintenance some $10 billion that would otherwise be locked in outdated, unwanted budget accounts.

The House vote prompted the Pentagon to announce a two-week delay in any decisions on how much of its 800,000-strong civilian workforce would be put on unpaid leave due to its $46 billion share of the automatic cuts. Officials want to analyze the measure's impact.

The funding measure will now be sent to President Barack Obama to be signed into law.

COMPETING VISIONS

It gives Congress breathing room for a few months to argue over which party has a more viable budget vision before they face another showdown this summer over raising the federal debt limit.

Ryan's budget, marked by repeal of President Barack Obama's health care reforms and deep spending cuts to Medicaid for the poor and other programs, will define Republicans' positions in the rest of this year's fiscal battles and in congressional elections in 2014.

It will be matched by a Democratic-focused budget expected to be passed on Friday by the Senate, the chamber's first in four years. That plan, from Senate Budget Committee Chairman Patty Murray, calls for $1 trillion in additional tax revenues, $100 billion in new infrastructure and jobs spending and modest cuts to health care programs.

And during the week of on April 8, President Barack Obama will finally weigh in with his budget request, two months after it was due. Some analysts suggest that this could try to cut a middle path between the Democratic and Republican visions.

The House voted 221-207, largely along party lines, to approve Ryan's non-binding budget resolution, with all Democrats and 10 Republican conservatives opposing it.

The Ryan plan aims to drastically shrink deficits over the next decade and reach a small surplus by 2023 without raising any additional tax revenue.

Like previous budgets that solidified his position as Republicans' fiscal guru and helped him become the party's vice presidential candidate last year, it proposes major changes to the Medicare health care program for the elderly.

This popular but increasingly expensive program would be converted to a voucher-like system of subsidies for seniors to buy private health insurance or coverage through the traditional Medicare program.

Democrats complained that the Ryan plan will crush near-term economic growth for the sake of an arbitrary goal of reaching balance in 10 years.

"It adopts the European-style austerity approach that we've seen slow down economies in many parts of Europe," said Democratic Representative Chris Van Hollen, the top Budget Committee Democrat. "We should instead be focusing on job growth and putting people back to work."

Ryan countered that his plan draws a deep contrast with Democrats, whom he says are not serious about taming the growing U.S. debt of $16.7 trillion.

"It reveals each side's priorities. It clarifies the divide that exists between us," Ryan said of his plan. "We want to balance the budget. They don't. We want to restrain spending, they want to spend more money."

The Democrats' budget plan envisions deficits in the $400-600 billion range through the next decade, but maintains that these will average 2.4 percent of U.S. economic output, a level many economists view as sustainable.

The Democrats' budget seeks $1 trillion in new tax revenues by sharply curbing tax breaks for the wealthy and proposes $100 billion in new spending on infrastructure and job training. It aims to replace the automatic spending cuts, half with revenues and rest through other cuts, and offers only modest, undefined spending reductions to healthcare, while keeping the structure of social safety net programs largely unchanged.