Last-minute budget deal reached to avoid shutdown

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By Robert Schroeder
and Steve Goldstein
, MarketWatch

WASHINGTON (MarketWatch) — Congressional leaders and the White House on Friday reached a late-hour deal to keep the federal government running and avoid the first shutdown in 15 years.

The deal, first announced by House Speaker John Boehner, features a short-term agreement to keep the government open next week, giving negotiators enough time to craft a longer deal to keep the government in operation through the end of September.

Senate Majority Leader Harry Reid said on the Senate floor that $38.5 billion will be cut from the original budget for the fiscal year that runs through September in what leaders called the biggest annual spending reduction in history — albeit from a deficit that could reach $1.5 trillion in 2011 alone.

“Some of the cuts we agreed will be painful,” President Barack Obama said in a brief televised address. “Both sides had to make tough decisions.”


SpeakerBoehner/Flickr

House Speaker John Boehner speaks with President Barack Obama Friday evening, one of several conversations between the Ohio Republican and the president.

Controversial riders to deny funding to Planned Parenthood and the Environmental Protection Agency were dropped. Throughout much of Friday, Reid and other Democrats vociferously protested plans to cut funding to Planned Parenthood.

Even some Republicans, including possible presidential candidates like Michele Bachmann and Mike Huckabee, said a deal should be pursued even without denying funding to the country’s top abortion provider.

The last-minute brinksmanship will keep some 800,000 government workers on the job and a variety of services, from passport issuing to tax collection, continuing. It also will allow the military, fighting three wars simultaneously, to continue receiving their paychecks.

What’s next in the Middle East

WSJ’s Margaret Coker had a first-hand seat to the recent revolutions in Tunisia, Egypt and Libya. She joins Simon Constable to discuss what’s likely to happen next as these Middle East countries transition to new governments.

The deal also will help businesses avoid further uncertainty at a time of Middle East unrest that has sent oil prices surging and the Japanese disaster that has impacted supply chains.

But the difficult negotiations portend more budget drama to come.

Even on Friday, Texas Republican Senator Kay Bailey Hutchinson said negotiations to lift the debt ceiling will be “Armageddon.” And House Budget Committee Chairman Paul Ryan’s plan for next year’s budget, which includes plans to cut Medicare spending, has already drawn fierce resistance.

Robert Schroeder is a reporter for MarketWatch in Washington.
Steve Goldstein is MarketWatch’s Washington bureau chief.



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