* Modest budget bill wins big bipartisan majority in House
* Spending levels set for two years; shutdown threat eased
* Measure set for Senate passage next week
* Passage seen unlikely to end gridlock on other major bills
By David Lawder and Richard Cowan
WASHINGTON, Dec 12 (Reuters) - A breakthrough budget deal that avoids a government shutdown in January and blunts automatic spending cuts easily won passage in the U.S. House of Representatives on Thursday, laying the groundwork for two years free of funding crises.
The 332-94 bipartisan vote sends the measure to the Senate, which is expected to pass it next week despite the objections of conservative political groups that say it violates their core goal of cutting government spending.
The modest deal makes no major dent in the U.S. deficit and does not deal with the nation's borrowing authority, which could provoke a battle when it needs to be increased by Congress in late February or early in the spring.
Nor is there any expectation that it will usher in a new era of cooperation on other issues, such as immigration or gun control.
The deal sets spending levels for two years, a significant break from the recent pattern of short-term funding bills that require extension every few months, always under the threat of a government shutdown like the 16 day closure in October.
It follows three years of bitter partisan warfare over spending, taxes and President Barack Obama's healthcare law that twice brought the nation to the brink of defaulting on its obligations.
The vote was a victory for Republican House Speaker John Boehner, who has been repeatedly rebuked by the conservative, Tea Party wing of his caucus. This time, however, he demonstrated he could steer a budget compromise through the deeply divided chamber and that Republicans were capable of avoiding the brinkmanship that has marked the past three years.
"Is it perfect, does it go far enough? No, not at all," Boehner said of the budget deal during a day-long House debate.
"It's going to take a lot more work to get our arms around our debt and our deficit, but this budget is a positive, positive step in that direction," he added.
The budget measure won a strong majority of House Republicans and split the Tea Party activists that have made Boehner's three years as Speaker so challenging. Some of the House's most conservative members, such as Louisiana's John Fleming and Blake Farenthold of Texas, voted yes.
The 62 Republican "no" votes, out of 232, included retiring Tea Party firebrand Michele Bachmann of Minnesota and Justin Amash of Michigan, who regularly opposes Boehner.
But many lawmakers were skeptical that the deal, negotiated by Republican Representative Paul Ryan and Democratic Senator Patty Murray, will become a template for cooperation in 2014.
Chances for ambitious deficit reduction or reforming outdated immigration and tax laws were still remote.
"I fear this will be a one-time moment because I see no indication of flexibility on other key fiscal issues or bills like immigration reform," Representative Chris Van Hollen, a member of the House Democratic leadership, told Reuters.
The problem, according to lawmakers interviewed by Reuters, is that the Murray-Ryan budget deal did not attack deep philosophical issues that divide Democrats and Republicans, such as reining in expensive social programs and ending some tax breaks for the wealthy.
"To me, a real bipartisan deal is when both sides really get into the crux of solving a problem. Let's face it, this was a skate-by solution," said Republican Senator Bob Corker of Tennessee.
At least for now, Republicans, chastened by October's bruising shutdown fight, were showing little appetite for a repeat anytime soon.
A first test will come in early 2014, when Congress needs to raise the federal debt limit again. The borrowing cap has become a perennial pressure point for Republicans to make demands for deep spending cuts.
The Murray-Ryan pact approved on Thursday does nothing to stem the worrisome growth of the $17 trillion federal debt, but it locks in spending levels for two fiscal years, eliminating the threat of another federal shutdown until Oct. 1, 2015.
Congressional appropriators still will have to pass legislation implementing the budget deal. Their first deadline is coming up on Jan. 15, when current agency funding runs out.
By allowing a $63 billion increase in spending on federal agencies and discretionary programs over two years in exchange for other budget savings, it reduces the harmful effects of the across-the board sequester cuts that have hit every government program from medical research to military weapons development.
Before the House passed the budget accord, Ryan hailed the fact that the deal provides some $23 billion in additional deficit reduction over 10 years.
"This bill saves more than if we did nothing," Ryan said.
Those savings allowed many Republicans to set aside their objections to higher near-term spending and may help burnish Ryan's credentials as a pragmatic deal-maker as he considers whether to seek the Republican presidential nomination in 2016.
The deal survived a barrage of criticism from conservative political groups, which argued that it will increase near-term spending in exchange for savings in future years.
The Heritage Foundation said the deal's promised savings may never materialize.
"It spends long before it saves," the conservative group said in a blog posting.
Further underscoring Republican divisions, Senate Minority Leader Mitch McConnell will vote against the measure next week in that chamber, a source close to the Kentucky Republican said. McConnell, facing a primary re-election challenge from a conservative Tea Party candidate, objects to the increase in spending.
Democrats also presented a challenge to the measure, demanding an extension of long-term unemployment benefits for about 1.3 million Americans that expire at year-end. This was thwarted by Republicans. Democrats vowed to come back in January to work on retroactively extending the benefits.