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

The $1.01 trillion budget deal, which passed 64-36 today, eases $63 billion in automatic spending cuts, raises user fees, and lowers the U.S. deficit over 10 years. The plan keeps in place about half of the spending reductions known as sequestration for next year and about three-quarters of the planned cuts for 2015.

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

“The bargain rolls back the painful cuts of the sequester—including devastating cuts to education, medical research, infrastructure investments, and defense jobs,” Senate Majority Leader Harry Reid said before the vote today. “This isn't a 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't include tax increases Republicans oppose or entitlement- program changes that Democrats resist. It will help prevent another government shutdown for the next two years, and Obama said he will sign it into law.

The deal sets discretionary spending at $1.01 trillion for this fiscal 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 $23 billion over 10 years.

Veterans Benefits

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

The House on Dec. 12 passed the plan 332-94, with backing from 73 percent of Republicans and 82 percent of Democrats.

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

Congress must now pass legislation by Jan. 15 that spells out the spending plans to avert a second government shutdown in four months. Lawmakers have begun drafting an omnibus appropriations bill that will implement the budget accord.

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

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

'Not Something to Be Trifled With'

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

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

Republican leaders are considering several proposals they want to include with a debt-limit increase, including a delay or repeal of the individual mandate in the health-care law and energy and tax-code changes. Republicans probably will set their plans after an annual policy retreat in late January.

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

Some Republicans balked at supporting the budget measure because the accord pushes savings into future years and includes the user fees 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 Budget Office. The plan would lower the deficit by $3.1 billion in 2014 and $3.4 billion in 2015 and exceed $20 billion a year in 2022 and 2023, the CBO said.

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

Doctor Payments

The accord spared doctors for three months from cuts in the Medicare reimbursement rates set to start in January. The measure doesn't extend emergency benefits for 1.3 million unemployed workers, an omission that frustrated Democrats, who say they plan to continue the fight in January.

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

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

Instant Insights /

Congress Sends Obama Budget

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