Awwal 25, 1432 H/Feb 28, 2011, SPA -- A short-term deal taking shape in Congress to avert a government shutdown is only a temporary respite from a bitter debate over the U.S. federal budget as Democrats and Republicans clash over spending cuts, according to Reuters. With government funding due to expire on Friday, lawmakers in the Republican-controlled House of Representatives and the Democratic-controlled Senate were expected this week to vote on a measure that would push the deadline back by several weeks. That would buy more time for the two chambers to agree on funding levels for the rest of the fiscal year, which ends on September 30. But it gives little clarity for financial markets, military contractors, local governments and millions of ordinary citizens who are wondering how they will be impacted by a budget fight that is likely to dominate Washington this year. President Barack Obama's Democrats are in a pitched battle over spending cuts with Republicans, who were energized by big wins in November elections after campaigning for smaller government to curb a massive U.S. budget deficit. MF Global analyst Chris Krueger said budget-cutting Republicans, spurred on by Tea Party fiscal conservatives, now have the upper hand in that fight. "The question is not whether to cut, but how much," he wrote in a research note on Monday. But Scott Lilly, an analyst at the liberal Center for American Progress think tank, said the Republicans look like they backed down from a shutting down government, a move that damaged them the last time it happened in the mid-90s. "The fact that it looked like the Republican leadership blinked for this two-week period I think leaves them in a somewhat weaker position," Lilly said on a conference call. Democrats warn that the $61 billion in cuts Republicans are seeking -- roughly 25 percent of the government's non-military operations -- would deliver a body blow to the fragile economic recovery at a time when unemployment is at 9 percent. Goldman Sachs estimated last week that the Republican plan, which passed the House on Feb. 19, would trim economic growth by up to two percentage points this year. Obama told state governors on Monday that everyone should be ready to sacrifice to help tackle a budget deficit that is projected to hit a record $1.65 trillion this year, equal to 10.9 percent of the economy. 700,000 FEWER JOBS? Economist Mark Zandi, who has advised congressional leaders of both parties, estimated that the Republican proposal would lead to 700,000 fewer jobs by the end of 2012. "Significant government spending restraint is vital, but given the economy's halting recovery, it would be counterproductive for that restraint to begin until the U.S. is creating enough jobs to lower the unemployment rate," Zandi wrote. The outlines of a short-term compromise emerged last Friday when House Republicans unveiled a measure that would cut spending by $4 billion over the next two weeks, roughly double the rate they had previously sought, but concentrate those cuts on programs that Obama supports eliminating. Senate Majority Leader Harry Reid indicated that could be acceptable, and several other Democratic lawmakers over the weekend said they were somewhat optimistic a shutdown could be averted. "We think we're moving in the right direction," White House spokesman Jay Carney said on Monday. The deal indicates that leaders from both parties might be able to work together constructively on budget issues -- but it remains to be seen whether rank-and-file Republicans who have pushed for the deepest cuts will go along, said David Kendall, a senior fellow at the centrist think tank Third Way. "What's really at stake is whether Republican leadership can lead its own party," Kendall said. The House is scheduled to vote on the measure on Tuesday after a few hours of debate that will limit the ability of lawmakers to alter the bill. The Senate is likely to pass the bill without changes, a senior Republican Senate aide said. Even if the stopgap measure passes, lawmakers will ultimately have to agree on spending levels for the rest of the fiscal year even as they begin work on a budget for fiscal 2012, which starts on October 1. The U.S. government last shut down due to a budget standoff in 1995-96, and Republicans are widely perceived to have lost that fight in the court of public opinion.
