August 01, 2012
Credit: Credit: Architect of the Capitol
Washington took some tentative steps toward confronting its looming fiscal threats on Tuesday with a deal in Congress to neutralize the risk of a government shutdown that could upset voters ahead of the Nov. 6 elections.
The White House said it would shield U.S. military pay from automatic budget cuts due to take effect in January -- a move that could shift more of the reductions onto defense contractors. It also instructed agencies to begin preparing for some across-the-board cuts.
The top Republican and Democrat in Congress struck a deal to extend funding for federal government agencies and discretionary programs through March 2013, calling a truce in at least part of Washington’s multi-front battle over taxes and spending.
The six-month spending extension, announced by Republican House of Representatives Speaker John Boehner and Democratic Senate Majority Leader Harry Reid, will fund programs from defense education to medical research at an annual rate of $1.047 trillion, the level specified in a debt-limit deal last year.
The full House and Senate would still need to approve the measure by Sept. 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 wrangling for Congress 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.
Economists say inaction by lawmakers would unleash tax increases and budget cuts that would crush recovery and throw the economy back into recession next year.
“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 said in a statement.
“I hope that we can face the challenges ahead in the same spirit of compromise,” he added.