The U.S. Senate cleared and sent to President Barack Obama thefirst bipartisan budget produced by a divided Congress in 27 years,resolving (for now) spending issues that had helped spur agovernment shutdown in October.

The $1.01 trillion budget deal, which passed 64-36 today, eases$63 billion in automatic spending cuts, raises user fees, andlowers the U.S. deficit over 10 years. The plan keeps in placeabout half of the spending reductions known as sequestration fornext year and about three-quarters of the planned cuts for2015.

Neither party liked the cuts, which in January would havepinched Pentagon spending as well as domestic programs. Neitherparty could find a way to erase them all in this compromise, whichdoes little to address the nation's $17 trillion debt.

“The bargain rolls back the painful cuts of thesequester—including devastating cuts to education, medicalresearch, infrastructure investments, and defense jobs,” SenateMajority Leader Harry Reid said before the vote today. “This isn'ta perfect bargain. No compromise is ever perfect.”

The deal crafted by Senator Patty Murray, a Washington Democrat,and Representative Paul Ryan, a Wisconsin Republican, doesn'tinclude tax increases Republicans oppose or entitlement- programchanges that Democrats resist. It will help prevent anothergovernment shutdown for the next two years, and Obama said he willsign it into law.

The deal sets discretionary spending at $1.01 trillion for thisfiscal year, higher than the $967 billion in the 2011 budget plan,leading some Republicans to vote against it. The deal raises fees,including for airline passengers, and cuts the deficit by $23billion over 10 years.

Veterans Benefits

Lawmakers plan to make a technical correction to the law afterpassage to ensure that disabled veterans aren't hurt by a rollbackin military pension benefits, Murray said today on the floor.Republican Senators Lindsey Graham of South Carolina, Roger Wickerof Mississippi, and Kelly Ayotte of New Hampshire had complainedthat the law cut benefits of veterans forced to retire as a resultof injuries.

The House on Dec. 12 passed the plan 332-94, with backing from73 percent of Republicans and 82 percent of Democrats.

The last time Congress reached a budget agreement with the twochambers run by separate parties was in 1986, when Democratscontrolled the House and Republicans ran the Senate.

Congress must now pass legislation by Jan. 15 that spells outthe spending plans to avert a second government shutdown in fourmonths. Lawmakers have begun drafting an omnibus appropriationsbill that will implement the budget accord.

Senate Appropriations Chairwoman Barbara Mikulski of Marylandtold fellow Democrats during a closed-door meeting yesterday thatshe plans to have a catchall spending bill ready for lawmakers toconsider when they return to Washington in January, Reid said.

“She's going to work during the Christmas break, all thesubcommittees will work, and when we come back, she believes wewill have an omnibus,” Reid said.

'Not Something to Be Trifled With'

The plan leaves the door open to a possible fight over raisingthe debt limit as U.S. borrowing authority is set to lapse inFebruary.

Congress suspended the debt limit through Feb. 7 as part of adeal to end a partial shutdown in October. After that date, thegovernment can use so-called extraordinary measures to preventmissed payments. Treasury Secretary Jacob J. Lew has said thosesteps can last for about a month.

Republican leaders are considering several proposals they wantto include with a debt-limit increase, including a delay or repealof the individual mandate in the health-care law and energy andtax-code changes. Republicans probably will set their plans afteran annual policy retreat in late January.

“This is not something to be trifled with,” White House presssecretary Jay Carney said today about raising U.S. borrowingauthority. “It is not something to be horse-traded over. It's thefull faith and credit of the United States.”

Some Republicans balked at supporting the budget measure becausethe accord pushes savings into future years and includes the userfees that some groups are labeling a tax increase.

Much of the deficit reduction will come in later years,according to an analysis by the nonpartisan Congressional BudgetOffice. The plan would lower the deficit by $3.1 billion in 2014and $3.4 billion in 2015 and exceed $20 billion a year in 2022 and2023, the CBO said.

A big portion of the savings is tied to extending the cuts inMedicare provider payments into 2022 and 2023, rather than lettingthem expire in 2021 as under current law.

Doctor Payments

The accord spared doctors for three months from cuts in theMedicare reimbursement rates set to start in January. The measuredoesn't extend emergency benefits for 1.3 million unemployedworkers, an omission that frustrated Democrats, who say they planto continue the fight in January.

It doesn't continue more than 50 tax breaks that will lapse onDec. 31 including the research and development tax credit used bycompanies such as Intel Corp.

Senator Jeanne Shaheen, a New Hampshire Democrat, said she wantsto replace the provision cutting military pensions, worth $6billion, that takes effect in two years. Shaheen introduced a billthat would replace the cost-of-living benefit cuts by ending a taxbreak used by U.S. companies with overseas addresses to avoidpaying taxes.

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.