U.S. Senate narrowly passes first budget in four years

WASHINGTON Sat Mar 23, 2013 4:04pm IST

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A man walks past the United States Capitol Dome before dawn in Washington March 22, 2013.

Credit: Reuters/Gary Cameron

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WASHINGTON (Reuters) - The U.S. Senate on Saturday narrowly passed its first federal budget in four years, a move that will usher in a relative lull in Washington's fiscal wars until an anticipated summer showdown over raising the debt ceiling.

The budget plan was passed by a 50-49 vote in the Democratic-controlled chamber. Four Democratic senators facing tough re-election campaigns in 2014 joined all the Senate Republicans in opposing the measure, which seeks to raise nearly $1 trillion in new tax revenues by closing some tax breaks for the wealthy.

The Senate budget, which reflects Democratic priorities of boosting near-term job growth and preserving social safety net programs, will square off in coming months against a Republican-focused budget passed by the Republican-dominated House of Representatives.

Neither of the non-binding blueprints has a chance of passage in the opposing chamber, leaving Congress no closer to resolving deep differences over how to shrink U.S. deficits and grow the economy. But they give each party a platform from which to tout their respective fiscal visions.

The Democrats' plan from Senate Budget Committee Chairman Patty Murray aims to reduce deficits by $1.85 trillion over 10 years through an equal mix of tax increases and spending cuts.

The Republican plan from House Budget Committee Chairman Paul Ryan seeks $4.6 trillion in savings over the same period without raising new taxes. It aims to reach a small surplus by 2023 through deep cuts to health care and social programs that aid the poor.

Murray said after the vote that she would try to work with Ryan on a path toward compromise.

"While it is clear that the policies, values, and priorities of the Senate budget are very different than those articulated in the House budget, I know the American people are expecting us to work together to end the gridlock and find common ground, and I plan to continue doing exactly that."

SHUTDOWN THREAT

Passage of a stop-gap government funding measure on Thursday lowered the temperature in the budget debate by eliminating the threat of a government shutdown next week.

"We're going to get a breather here. Congress will let things cool off a bit and there'll be other issues that come to the forefront in the spring," said Greg Valliere, chief political strategist at Potomac Research Group, a firm that advises institutional investors on Washington politics.

These issues include legislation on gun control, immigration reform and initial work on simplifying the tax code, which is particularly important to Republicans.

Joining Republicans in opposing the Democratic budget were Democratic senators from conservative-leaning states: Max Baucus of Montana, Mark Begich of Alaska, Kay Hagan of North Carolina and Mark Pryor of Arkansas. Voting for a budget that raises tax revenues could increase their vulnerability in congressional elections next year and put Democrats' thin majority at risk.

In the lead-up to the Senate vote early on Saturday morning, the body considered more than 100 largely symbolic, non-binding amendments to the budget aimed at scoring political points and staking out positions.

Among notable amendments, the Senate signaled strong support for allowing states more authority to collect sales taxes on Internet purchases, for approval of the controversial Canada-to-Texas Keystone XL oil pipeline and for repealing a tax on medical devices imposed by President Barack Obama's health care reform law.

The Senate also voted 99-0 to end policies that subsidized large banks considered "too big to fail" but came out against imposing taxes on industrial carbon emissions.

Ryan's plan aims to reach a small surplus with no tax increases by 2023 through deep cuts to social safety net programs. This enables Republicans to claim that they are more responsible by balancing the budget.

"The House budget changes our debt course, while the Senate budget does not," said Senator Jeff Sessions, the top Republican on the Senate Budget Committee.

BATTLE OVER "BALANCE"

In a taste of the ideological debates to come, Murray claimed that the Senate budget was more "balanced" because it emphasized job growth and offered an equal amount of revenue increases and spending cuts.

The Senate had not passed a budget resolution since 2009 because of fiscal policy disputes with House Republicans that forced Congress to turn to numerous stop-gap spending measures to avoid government shutdowns.

To protect their thin Senate majority, Democrats avoided exposing their members to potentially damaging votes to raise taxes ahead of 2012 elections, arguing that a 2011 budget deal set spending levels for several years and made the non-binding budget legislation unnecessary.

But this year, under the February debt limit increase law, members of both the House and Senate faced pay suspensions if their chamber had failed to pass a budget by April 15.

Although lawmakers in both parties have called for a return to normal budgeting procedures after years of stop-gap spending bills and high-pressure deadlines, there is little chance that they can work out differences between the two budgets.

"The idea of conferencing them is kind of a joke. You would expect that if there were a chance of success, they wouldn't have planted flags on completely different planets," said Sean West, U.S. policy director at Eurasia Group, a political risk consultancy.

Ultimately, it may take another 11th-hour deal between Obama and congressional Republicans to set a fiscal path forward as part of a deal to raise the debt ceiling, he said. The U.S. Treasury is expected to exhaust its borrowing capacity around late July or early August.

In 2011, a similar fight over the debt limit shook financial markets and cost the United States its top-tier credit rating. (Editing by Pravin Char)

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