US averts Government Shutdown – Spending Bill Passed

Category: Economy | US Federal Reserve March 22, 2013 | Comments Off Share
US averts Government Shutdown – Spending Bill Passed

US averts Government Shutdown – Spending Bill Passed

The U.S. House of Representatives, in a rare show of unity & amazing cooperation, voted to approve a legislation that keeps government agencies and programs funded through the end of the fiscal year on September 30. The funding package will now be sent to President Barack Obama to be signed into law. Republicans chose not to use the March 27 expiration of spending authority and a potential agency shutdown as a leverage point to demand more spending cuts. Instead, they want to wage a campaign for deficit reduction centered on proposals by Ryan, the House Budget Committee chairman. The stop-gap funding bill that temporarily eases partisan tensions after months of bitter fights over budgets thus eliminated the threat of a government shutdown next week. The 318-109 vote in the House, following a similarly easy vote in the Senate on Wednesday, could signal the beginning of a new determination in both parties to avoid the kinds of bitter last-minute showdowns that dominated the previous two years. But another showdown looms this summer over raising the Federal Debt Limit. 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.”

Spending Cuts to Match Borrowing – Dollar to Dollar:

Just before the government funding vote, the House passed Representative Paul Ryan’s plan to balance the budget in 10 years through deep cuts to healthcare and social programs while lowering tax rates. The Democrats’ plan, which raises tax revenue and calls for more modest cuts to aid job growth, is expected to pass in the Senate on Friday. House Speaker John Boehner wants any increase in the federal borrowing cap to be matched by an equal amount of spending cuts, setting up potential repeat of the 2011 debt-limit brawl that cost the United States its top-tier credit rating. He said he would use the next debt limit increase deadline – likely in late July or early August – to demand more spending cuts and major changes to the federal Healthcare and retirement programs. 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.

Creating Jobs or Spending More?

Even as they finished work on 2013 spending, both chambers have already turned their attention to their 2014 budgets. Just minutes before it approved the spending bill, the House passed the GOP budget, written by Rep. Paul Ryan that calls for holding taxes steady and imposing deep cuts to projected spending in order to balance the budget in a decade. Ryan’s budget, marked by repeal of Obama’s healthcare reforms and deep spending cuts to the Medicaid insurance system 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. The House voted 221-207, largely along party lines, to approve Ryan’s nonbinding budget resolution, with all Democrats and 10 Republican conservatives opposing it. Senate Democrats later put Ryan’s plan to a vote in that chamber, where it was defeated 40-59, with five Republicans joining majority Democrats in voting against it. This popular but increasingly expensive program would be converted to a voucher-like system of subsidies for older Americans to buy private health insurance or coverage through the traditional Medicare program. Democrats complained the Ryan plan would 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 of Maryland, the top Budget Committee Democrat. “We should instead be focusing on job growth and putting people back to work.” Ryan countered that Democrats are not serious about taming the growing U.S. debt of $16.7 trillion, reported Reuters. “We want to balance the budget. They don’t. We want to restrain spending, they want to spend more money,” Ryan said of his plan. The Democrats’ budget plan envisions deficits in the $400 billion to $600 billion range through the next decade, but maintains that these will average 2.4% 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 the rest with other cuts, and offers only modest, undefined spending reductions to healthcare, while keeping the structure of social safety-net programs largely unchanged.



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