Senate to pass budget, ushering in lull in fiscal battle

WASHINGTON Fri Mar 22, 2013 5:59pm EDT

A general view of the U.S. Capitol building in Washington February 28, 2013. REUTERS/Jason Reed

A general view of the U.S. Capitol building in Washington February 28, 2013.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - The Senate was poised to pass its first budget in four years on Friday, a move that will usher in a relative lull in Washington's fiscal wars until an anticipated summer showdown over raising the debt ceiling.

For the next few months, Democrats and Republicans are expected to tout the partisan tax and spending policies reflected in their rival budgets while they turn to other legislative issues, such as immigration reform and gun control.

Passage of a stop-gap government funding measure on Thursday lowered the temperature in the budget debate by eliminating the threat of a government shutdown next week.

"We're going to get a breather here. Congress will let things cool off a bit and there'll be other issues that come to the forefront in the spring," said Greg Valliere, chief political strategist at Potomac Research Group, a firm that advises institutional investors on Washington politics.

In addition to gun control and immigration, these also will include work on simplifying the tax code, which is particularly important to Republicans.

After 2013 started with high drama over the January 1 "fiscal cliff" tax increase on the wealthy, Republicans in the House of Representatives chose not to press demands for deep spending cuts on a February debt limit increase or this week's funding bill.

Some $85 billion in automatic spending cuts were triggered on March 1, but their effects are just now starting to become apparent, and the funding bill will ease some of the pain for government agencies.

After a two-week Passover/Easter break, appropriations committees also will start work on spending bills for the fiscal 2014 year starting on October 1 that could give agencies further spending flexibility within their reduced budgets.

FIGHT OVER "BALANCE"

The Democratic budget is expected to be passed late on Friday night or early Saturday morning after the Senate votes on dozens of largely symbolic amendments aimed at scoring political points with key constituents.

Senate Budget Committee Chairman Patty Murray has described her Democratic blueprint as a "jobs and growth budget." It calls for raising nearly $1 trillion in new tax revenues through ending or capping some breaks for the wealthy, replacing the automatic spending cuts with other savings and making modest cuts to health care.

To stoke near-term economic growth, it also calls for $100 billion in new spending on infrastructure economic growth and

Murray's plan, which claims $1.85 trillion in overall deficit reduction through 2023, squares off against the House Budget Committee Chairman Paul Ryan's plan, which claims $4.6 trillion in savings on top of the automatic spending cuts.

Ryan's plan aims to reach a small surplus with no tax increases by 2023 through deep cuts to social safety net programs. This enables Republicans to claim that they are more responsible by balancing the budget.

"The House budget changes our debt course, while the Senate budget does not," said Senator Jeff Sessions, the top Budget Committee Republican. The Senate budget increases taxes increases spending and during that 10 years."

But in a taste of the ideological debates to come, Murray claims the Senate budget it is more "balanced" because it emphasizes job growth and offers an equal amount of revenue increases and spending cuts.

Although lawmakers in both parties have called for a return to normal budgeting procedures after years of stop-gap spending bills and high-pressure deadlines, there is little chance that they can work out differences between the two budgets.

"The idea of conferencing them is kind of a joke. You would expect that if there were a chance of success, they wouldn't have planted flags on completely different planets," said Sean West, U.S. policy director at Eurasia Group, a political risk consultancy.

Ultimately, it may take another 11th-hour deal between President Barack Obama and congressional Republicans to set a fiscal path forward as part of a deal to raise the debt ceiling, he said. The U.S. Treasury is expected to exhaust its borrowing capacity around late July or early August.

In 2011, a similar fight over the debt limit shook financial markets and cost the United States its top-tier credit rating.

Even then, the so-called "grand bargain" that reduces deficits by $2 trillion or more by pairing revenues from tax loopholes with savings from reforms to the Medicare health program for the elderly and the Social Security retirement system will likely remain elusive with such deep divisions.

"I'm skeptical that we get any sort of grand bargain," West said.

But a smaller deal could be that chips away at the deficit and prevents major disruptions to the economy and financial markets may be possible, added Valliere.

"The savings may be in the hundreds of billions, not the trillions, but it's another increment of fiscal restraint," he said.

(Editing by Alistair Bell and Eric Walsh)

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Comments (3)
Cyberblunt wrote:
A budget, great! But I thought we took out a trillion dollars for infrastructure among other things? Whats cool I guess with all this debt we are no condition to have any military operation for a long time plus no room for any unexpected surprises. Hey they should also cut my taxes being single and middle class sucks. I pay more in taxes than to my 401k, savings, stocks and drugs combine.

Mar 22, 2013 6:51pm EDT  --  Report as abuse
CountryPride wrote:
Senate Budget Committee Chairman Patty Murray has described her Democratic blueprint as a “jobs and growth budget.” It calls for raising nearly $1 trillion in new tax revenues.

How else are they going to pay for all the illegals in this country and also the F16′s and hundreds of millions they just gave to the Muslim Brotherhood in Egypt if they don’t rob another trillion from the US taxpayer. The only jobs and growth they are concerned about anymore is for the illegals and foreign countries.

Mar 22, 2013 9:43pm EDT  --  Report as abuse
sublation wrote:
Entitlements.

I am entitled to complain about the economy even when my stock price, my portfolio and my profits are at record levels.

I am entitled to a compliant and cheap workforce.

I am entitled to a modern and efficient transportation system and protection for my person and property, just as I am entitled to demonize the government workers who provide them.

I am entitled to complain bitterly about taxes that are always too high, even when they are at record lows.

I am entitled to have my earned income taxed as capital gains instead.

I’m entitled to my investment income taxed at the lowest rate anywhere in the world — or not at all.

I am entitled to inside information and favorable investment opportunities not available to ordinary investors.

I am entitled to brag about my investment returns on companies that cut costs by eliminating workers who will no longer be able to afford to purchase their products.

I am entitled to pass on my accumulated wealth tax-free to heirs, who in turn, are entitled to claim that they earned everything they have with hard work.

I am entitled to use unlimited amounts of my own or company funds to buy elections without disclosing such expenditures to shareholders or the public.

I am entitled to provide political support to radical, uncompromising politicians and then complain about how dysfunctional Washington has become.

I am entitled to publicly criticize the president and members of Congress, who are not entitled to criticize me and my shady business practices.

I am entitled to fire any worker who tries to organize a union.

I am entitled to break any existing union by moving, or threatening to move, operations to a union-hostile environment or by closing factories and hiring slave wage workers in China.

I am entitled to load companies up with debt in order to pay myself record bonus’ and investors big dividends — and then blame any bankruptcy on over-compensated workers.

I am entitled to contracts, subsidies, tax breaks, loans and even bailouts from government, even as I complain about job-killing government budget deficits.

I am entitled to take credit for all the jobs I create while ignoring any jobs I destroy.

I am entitled to claim credit for all the profits made during a booming economy while blaming losses or setbacks on adverse market or economic conditions on the government instead of the legislation that my corporation lobbied and wrote.

I am entitled to deny knowledge or responsibility for any controversial decisions made after my departure from the company, even while profiting from such decisions if they enhance shareholder value.

I am entitled to all the rights and privileges of running an American company, enjoying the American market, but owe no loyalty to American workers or taxpayers.

I am entitled to insult people less fortunate than me. I’m am entitled to leach large and stagnant pools of money out of the economy and into offshore accounts so that I can hide my true wealth.

I am rich and I am entitled. You’re welcome.

Mar 22, 2013 10:35pm EDT  --  Report as abuse
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