Congress Cuts a Deal to Avert a Government Shutdown
Policy + Politics

Congress Cuts a Deal to Avert a Government Shutdown

iStockphoto/The Fiscal Times

Democrats and Republicans in Congress reached a deal on Tuesday to fund federal government activities through next March and eliminate any threat of agency shutdowns that could upset voters ahead of the November 6 presidential and congressional elections.

The deal, announced by House of Representatives Speaker John Boehner and Senate Majority Leader Harry Reid, would fund discretionary federal programs - from defense and foreign aid to education and medical research - at an annual rate of $1.047 trillion, the level specified in last year's debt limit deal.

The full House and Senate would still need to approve the measure by September 30, the end of the current fiscal year, when funding runs out. Congress will be in recess most of August and the first week of September.

If passed by Congress, the deal for a six-month spending extension eliminates one layer of difficult year-end bills Congress must grapple with just after the election as it deals with the "fiscal cliff" of expiring tax cuts, automatic spending cuts, a debt-limit increase and other fiscal deadlines that economists say if not averted could harm an already-weak economy.

It also would protect Republicans from being blamed for potential government shutdowns by demanding bigger spending cuts than already agreed to in last year's multi-year budget deal.

"This agreement reached between the Senate, the House and the White House provides stability for the coming months, when we will have to resolve critical issues that directly affect middle class families," Reid, a Democrat, said in a statement. "I hope that we can face the challenges ahead in the same spirit of compromise."

Boehner said that House and Senate committee members and their staff would write legislation in August for the extension so that it could be passed by both chambers and signed into law by September 30.

The stop-gap spending measure is needed because Congress' normal process for passing bills to fund the government has broken down amid bitter partisan battles over funding levels.

Last year, Republicans used threats of government shutdowns and a debt default to win spending cuts aimed at reducing huge annual budget deficits. But the uncertainties caused by these threats led to financial market turmoil and voter discontent.

With this tentative deal, Republicans are trying to avoid a rerun of those fights, which could damage chances for their party's presidential candidate Mitt Romney and their party's bid to regain control of the Senate.

A year ago, Congress reached another hard-fought budget deal to avert a threatened U.S. debt default. This was originally designed to ensure budgetary peace well past this November's elections by specifying a discretionary spending level of $1.047 trillion for fiscal 2013, which starts on October 1.

This year, Republicans had sought an extra $19 billion in spending cuts, causing a bitter fight with Democrats over appropriations bills. But to secure an extension that reaches well into next year, they agreed to put their bid for deeper cuts on hold, aides said.

Should Republicans win big in November, the six-month extension would put them in a position for deeper cuts next year, rather than leaving spending decisions to a post-election, lame-duck Congress.