Congress Reaches Spending Deal to Avert Shutdown

U.S. lawmakers reached a tentative agreement on Thursday to fund an array of government agencies through September 30 of next year and avert a partial government shutdown that would have begun Saturday morning without a deal.

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One of the chief negotiators on the $1 trillion spending bill, Senator Daniel Inouye (D-Hawaii) told reporters last night that the deal had been struck and the full Senate could vote on the measure as early as Friday. The House of Representatives is expected to vote on Friday, a Republican aide said.

Current funding for agencies like the departments of Defense and Homeland Security and the Environmental Protection Agency expires at midnight on Friday. If passed by both the House and Senate, the proposed legislation would provide the full funding for the rest of fiscal 2012 for most of the government, including the Pentagon, EPA, and Department of Education.

The White House had initially pushed Congress to delay a spending plan until they could effect an equally important deal to extend a payroll tax cut and long-term unemployment benefits. However, linking the two otherwise separate measures only complicated negotiations, and threatened an unnecessary shutdown.

Negotiations over the payroll tax cut and unemployment benefits, as well as a pay cut for doctors treating elderly patients under the Medicare healthcare program, which Democrats seek to prevent, now continue separate from the spending bill. Democratic negotiators could turn to a two-month extension instead of the year-long one they prefer if a quick agreement cannot be reached.

Democrats and Republicans are split on how to cover the $120 billion cost of continuing a 4.2 percent payroll tax cut that, without action, will automatically rise to 6.2 percent on January 1. A House GOP measure passed Tuesday suggests a series of spending cuts to pay for the bill, including freezing pay for federal employees and members of Congress, eliminating a child tax credit for those in the U.S. illegally, and increasing Medicare premiums for those who earn more than $80,000 annually.

Senate Democrats disagree with a number of the GOP bill’s “central elements,” including the proposed cost offsets, the length of the unemployment insurance extension, and the weakening of some environmental regulations.

The GOP measure would renew aid for the unemployed, but cut back the maximum length of jobless benefits from the current 99 weeks to just 59 weeks. It would also allow states more flexibility in distributing unemployment assistance, permitting them to require applicants to submit to drug tests or show they are pursuing a high school degree if they don’t already have one.

Most significantly, the GOP is seeking to attach a so-called “rider” that would speed up approval of the construction of the controversial Keystone XL oil pipeline that would run from Canada down to Texas.

Earlier in the day Thursday, President Barack Obama warned Congress not to break for holiday recess without coming to an agreement. “Congress should not and cannot go on vacation before they have made sure that working families aren’t seeing their taxes go up by $1,000 and those who are out there looking for work don’t see their unemployment insurance expire,” Obama said.

Negotiations on the payroll tax cut extension picked up this week after Democrats on Wednesday dropped their demand that it be paid for with a surtax on millionaires, which Republicans staunchly opposed.

The payroll tax cut would give roughly 160 million Americans about $1,000 a year in additional spending power, which the White House and a number of economists say would boost the country’s economic recovery, though many Republicans refute such claims.

On the spending bill, Republicans and Democrats are split over policy initiatives backed by federal funds. Republicans ultimately agreed to drop two provisions that would have restricted families living in the U.S. from traveling to Cuba or transferring money to relatives there. Remaining in the legislation is a ban on the District spending local tax money on abortion.

The bill currently before Congress sets government spending for the year at $1.043 trillion, a level agreed to in an August deal that raised the nation’s legal borrowing limit. The figure represents a 1.5 percent drop in spending from the fiscal year that ended September 30.

The figure does not count $115 billion for overseas military operations, down $43 billion since this past year as the war in Iraq winds down. It also doesn’t include $8.1 billion in emergency disaster-relief spending.

The measure outlines spending for roughly three-fourths of the federal government — all agencies except for the departments of Agriculture, Commerce, Housing and Urban Development, Justice, Transportation, and State, as well as NASA and some smaller agencies, all of whose budgets were settled in a November deal. Most domestic programs will see cuts as Congress works to lower the federal deficit by reducing government spending.

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