Factbox: Sticking points in possible budget deal

WASHINGTON (Reuters) – Republicans and Democrats in Congress are trying to forge a budget deal that would impose the largest domestic spending cut in U.S. history and ensure that government funding does not run out on Friday.

The two sides have tentatively agreed to cut $33 billion from current levels, though the final number could change.

Though aides made some progress over the weekend, many stumbling blocks remain before the Democrats who control the Senate and the Republicans who control the House of Representatives can find common ground.

Here are some of their points of disagreement:

DEFENSE SPENDING

A Republican plan which passed the House in February would boost the Pentagon’s budget by $8 billion.

Democrats are proposing a $1 billion cut to current Pentagon spending and an additional $840 million cut from military construction projects. They also have outlined cuts to domestic security, for a total savings of about $2 billion.

Defense and security spending together account for about 23 percent of the total $3.7 trillion federal budget.

MANDATORY SPENDING

The budget fight has been largely waged over the 14 percent that Congress approves each year for domestic spending.

Most of the federal budget is beyond the reach of the annual budget process. The size of benefit programs like Social Security is determined by how many people qualify for them, not how much money Congress sets aside for them.

Democrats hope as much as $16 billion in cuts will come from these so-called mandatory programs. The Big Three — Social Security, the Medicare health plan for retirees, and the Medicaid plan for the poor — would not be affected.

Democrats have identified roughly $8 billion in mandatory spending cuts that were included in both the Republican plan that passed the House and a Democratic plan which failed in the Senate.

Among the largest of these: $4.9 billion from a Justice Department fund for crime victims; $400 million from a fund to seize assets from organized crime; and roughly $550 million from the SMART Grant student-aid program.

Republicans are leery that these changes in mandatory program spending, or “CHIMPs” in Washington-speak, would lead to lasting savings.

They want most of the cuts to come from the discretionary programs that are set by Congress annually, because that would set a lower baseline for spending in future years.

FUNDING RESTRICTIONS

The Republican plan would not just mandate steep spending cuts; it also would block dozens of Obama administration activities by denying them funding.

Democrats say there’s no way they’ll agree to any so-called policy rider that blocks implementation of Obama’s healthcare reform law. Riders that prevent funding for birth control and greenhouse-gas regulation are also off the table, they say.

Any final product is likely to include some policy riders, as many would have a negligible impact. One provision, for example, would block marketing assistance to mohair farmers.

Republicans say Democrats will have to agree to deeper cuts if they want policy riders dropped. That could mean the final product will require cuts of more than $33 billion.

(Reporting by Andy Sullivan; Editing by Chris Wilson)

Factbox: Sticking points in possible budget deal