Both house of the U.S. Congress passed hard-fought legislation Thursday that slices nearly $40 billion out of the government budget for the remainder of the fiscal year.
The House of Representatives voted 260-167 in favour. The Senate followed with its approval quickly, voting 81-19.
The legislation then was sent to President Barack Obama, who has promised to sign it. The legislation calls for $38 billion in cuts from domestic programs.
The plan cuts spending through Sept. 30, a compromise that was agreed to in the final moments before midnight last Friday when the government would have been forced to shut down for lack of appropriations to keep agencies running.
Regardless of passage of the measure, Mr. Obama and his Democrats remain locked in an ideological confrontation with Republicans, especially a nearly 90-strong freshman class in the House of Representatives that is allied with the ultraconservative tea party. Their victory in November gave Republicans control of the House and established a divided government that has forced Mr. Obama to accept compromises on spending and taxation that have deeply angered the liberal wing of his Democratic Party.
In the House, dozens of Democrats made up for tea party-backed Republican conservatives who voted no because they felt the cuts were too small.
Mr. Obama’s signature was assured. “Although the administration would not have agreed to many of these cuts under better fiscal circumstances, the bill reflects a compromise that will help the federal government live within its means while protecting those investments that will help America compete for new jobs,” the White House said in a written statement.
In anticipation of approval of the $38.5 billion in cuts over the next 5 1/2 months, Mr. Obama gave a major address on Wednesday laying out his fiscal vision to start whittling down the nation’s over $14 trillion debt in the coming years. The speech was seen as an opening of the president’s bid for re-election in 2012, a campaign that is sure to be dominated by the need to bring down the country’s spiralling debt.
The debt, in relation to the size of the American economy, has reached alarming proportions. Republicans in particular are pounding the issue, which they say endangers the country’s domestic well-being and its ability to influence world affairs.
The debt has shot up over the last decade as Mr. Obama has pumped billions into the economy to stop a global financial meltdown and overcome the recent Great Recession. But the red ink also is a result of steep tax cuts implement by former President George W. Bush and vast spending required by the wars in Iraq and Afghanistan.
The plan Mr. Obama outlined in his speech at George Washington University was significantly at odds with one unveiled last week by Republican Rep. Paul Ryan, the budget committee chairman, who proposed gradually phasing out key elements of the U.S. social safety net - government programs that provide health care for Americans age 65 and older and for poor people.
Mr. Obama fired a broadside at the Ryan vision that would transform Medicare, the health care program for the elderly, into a voucher-like system for people under the age of 55 and impose stringent cuts on Medicaid health care to the poor and disabled, including people in nursing homes. The president further said the nation must raise taxes on Americans with incomes above $200,000 - couples making more than $250,000 - erasing reductions implemented by Bush.
He proposed an unspecified “debt fail-safe” that would go into effect if Congress did not make sure the national debt would be falling by 2014 relative to the size of the overall economy.
“We have to live within our means, reduce our deficit and get back on a path that will allow us to pay down our debt,” the president said. “And we have to do it in a way that protects the recovery, and protects the investments we need to grow, create jobs and win the future.”
Mr. Obama’s speech was salted with calls for bipartisanship, but it also bristled with attacks on Republicans. They want to “end Medicare as we know it,” he said, and to extend tax cuts for the wealthy while demanding that seniors pay more for health care.
Mr. Obama spoke to an audience that included Ryan, who later told reporters he had been excited to receive an invitation to the speech, believing the administration was extending an olive branch.
“Instead, what we got was a speech that was excessively partisan, dramatically inaccurate and hopelessly inadequate to addressing our country’s pressing fiscal challenges,” Mr. Ryan said. “What we heard today was not fiscal leadership from our commander in chief. What we heard today was a political broadside from our campaigner in chief.”
Mr. Obama’s plan, clearly aimed at finding acceptance among independent voters, relied on some of the same deficit-reduction measures proposed in December by a bipartisan fiscal commission he appointed. The president met on Thursday at the White House with the co-chairmen of the commission, Democrat Erskine Bowles and Republican Alan Simpson, “to once again thank them for their outstanding work, but more importantly to solicit their ideas in terms of how we move forward.”
Mr. Obama praised “the framework that they developed that helps to shape my thinking on these issues.” The commission recommended changes to federal entitlements such as Medicare and Medicaid, the major government health programs, and the Social Security retirement pensions program as well as an overhaul of the tax code that would increase government income by eliminating popular exemptions and loopholes while lowering the overall rate.
Neither Mr. Obama nor his aides distributed any detailed accounting of the effect of his recommendations on the deficit, which is expected to top $1.5 trillion this year, or the national debt.
