Tough choices, clock ticking in US budget fight

* Deal needed soon to avert government shutdown by Friday

* Democrats push for $2 billion in defense cuts

* Republicans target healthcare law, other Obama favorites

By Andy Sullivan and Caren Bohan

WASHINGTON, April 4 (Reuters) – U.S. Democrats and
Republicans faced tough choices on Monday as they raced to
complete a record spending-cut package that would keep the
federal government operating beyond a Friday deadline.

Congressional staffers over the weekend sorted out how much
to cut from broad areas such as agriculture and defense as the
two sides tried to finalize a deal that would tentatively cut
$33 billion from current levels, aides said.

But difficult choices remain if Congress is to avert a
government shutdown that could throw hundreds of thousands of
people out of work, rippling through an economy that is still
recovering from the deepest recession since the 1930s.

A deal on spending for the rest of the current fiscal year
will probably have to be in place by Tuesday evening in order
to give the House of Representatives and the Senate enough time
to pass it into law by midnight Friday, when a temporary
funding measure expires. The fiscal year ends Sept. 30.

Republicans are resisting more than $2 billion in cuts that
Democrats have proposed to defense and national security,
according to a Democratic aide. They also remain skeptical of
about $6 billion to $8 billion in Democratic cuts to education,
healthcare and other programs that usually lie beyond the reach
of the yearly budget cycle, several aides said.

Democrats are rejecting Republican efforts to choke off
funding for President Barack Obama’s signature healthcare
overhaul law, environmental protection and other White House
priorities.

The size of the package could change as Republicans could
demand deeper cuts in exchange for dropping these funding
limitations.

‘NO DEAL’

“There is no ‘deal,'” said Michael Steel, a spokesman for
House Speaker John Boehner. “Nothing — including a figure for
spending cuts — has been agreed to, or will be, until
everything is agreed to.”

The battle over spending has consumed Washington for
months, as Republicans try to fulfill a campaign promise to
scale back the size of government and Democrats warn that the
economy could be hurt if the cuts are too deep and too sudden.

This fight could be dwarfed by other budget battles to
come. Though a cut of $33 billion would be the largest domestic
spending reduction in U.S. history, it would have little effect
on a budget deficit projected to hit $1.4 trillion this year.

The battle has also been largely confined to the annual
domestic spending that makes up only 13 percent of the budget.

House Republicans are expected to outline on Tuesday much
more ambitious proposed cuts for the next fiscal year. House
Budget Committee Chairman Paul Ryan’s blueprint for the fiscal
year that begins on Oct. 1 would transform government health
insurance programs like Medicare and Medicaid, impose overall
spending caps and cut corporate and individual taxes.

Congress also will confront a tough vote in coming weeks
over raising the government’s borrowing authority, currently at
$14.3 trillion. Republicans hope to wring further spending
concessions in return for a vote to raise the debt ceiling.

(Editing by Will Dunham)

Tough choices, clock ticking in US budget fight