Democrats offer deeper cuts in U.S. budget fight

By Andy Sullivan

WASHINGTON (Reuters) – President Barack Obama’s Democrats on Monday offered to cut another $20 billion from the U.S. budget in an attempt to reach a deal with congressional Republicans that would avert a government shutdown.

The latest White House plan would split the difference between a Republican plan that would cut $61 billion in the current fiscal year and the Democrats’ initial proposal, which would have kept spending flat.

With time running short, the two sides traded barbs in public even as they continued meetings aimed at resolving a dispute that has dominated Washington in recent months, even though the money at stake represents a small slice of the $3.7 trillion federal budget.

Democrats said Republican leaders were more concerned with catering to conservative Tea Party activists than finding a compromise that could keep the government running beyond April 8, when current funding runs out.

“Republicans have to resolve their own deep disagreements before we can find middle ground between the two parties,” Senate Democratic Leader Harry Reid said on the Senate floor.

Republicans said they hadn’t seen the Democratic plan yet.

“Senator Reid failed to pass a budget last year and once again is abandoning his responsibility to offer a serious spending plan,” said House Republican Leader Eric Cantor.

The Democrats’ $20 billion offer comes on top of $10 billion in cuts that have already taken effect. Negotiators have to find common ground on more than just a spending cut number as time runs short for a possible deal.

Republicans aligned with the grassroots Tea Party movement hope to use the budget to prevent the government from spending money on a number of Obama initiatives, from the healthcare overhaul to greenhouse gas regulation. That’s a nonstarter in the Democratic-controlled Senate.

Democrats are weighing cuts to cut benefit programs that usually lie beyond the reach of the annual budget process, which would ease the pain for discretionary programs like education and housing that must be approved by lawmakers each year. Republicans say the debate should focus on discretionary spending.

Even as lawmakers struggle to finish this year’s budget, House Republicans are readying a plan for the next fiscal year that is expected to outline further spending cuts that would reshape popular benefit programs like Medicare and Medicaid.

Congress will also have to vote to raise the government’s borrowing authority before the current $14.3 trillion limit is reached in the next two months.

CLOCK TICKING

A stopgap measure is keeping the government running through April 8, but aides say a deal needs to be in place by the middle of this week to ensure enough time to pass it through both chambers of Congress before the money stops flowing.

The government has been operating on a temporary extension of last year’s budget since October 1 as Republicans try to keep a campaign promise to scale back government, while Democrats worry that deep cuts could hurt the economy.

The new Democratic proposal is roughly similar in size to a plan that Republican House leaders put forward a few months ago. But rank-and-file Republicans aligned with the Tea Party rejected that plan as inadequate, forcing through a proposal that would require immediate cuts of roughly 25 percent for domestic agencies.

Several Republican lawmakers are scheduled to address a Tea Party rally at the Capitol on Thursday.

Amid the heated rhetoric, some observers say a shutdown is on the horizon.

“There is a growing sense that a shutdown is likely to occur before there’s actual negotiations,” said Ron Bonjean, a former Republican congressional spokesman.

A shutdown would force thousands of layoffs and rattle financial markets, though “essential services” like the military would keep functioning.

The budget battle has already taken a toll on government agencies that have been handcuffed by the uncertainty and lack of authority to move ahead with new projects. Everything from airports and prisons to scientific research has felt the pinch.

Though the Republican plan would require dramatic cuts to everything from food safety to nuclear weapons monitoring, it would do little to reduce a budget deficit that is projected to hit $1.4 trillion this year.

That’s because many programs use money from previous years. The Republican plan would lead to reduced government spending down the road but it would only lead to a spending reduction of $9 billion this year, according to the nonpartisan Congressional Budget Office.

(Additional reporting by Thomas Ferraro, Richard Cowan and Caren Bohan; Editing by Deborah Charles and Cynthia Osterman)

Democrats offer deeper cuts in U.S. budget fight