U.S Congress agree budget deal

U.S Congress agree budget dealbigstock-Us-Capitol-resized

Following the 16 day government shutdown in October, a divided Congress was given a deadline of 13th December to reach a new budget deal. While government funding is guaranteed until the 15th of January and the U.S debt limit extended to the 7th of February 2014, a more decisive deal is needed to prevent more spending cuts being automatically activated.

A Congressional budget committee met yesterday to work out the details of this second deal and counteract another potential shutdown in the New Year

when government funding ends. The new deal agrees to fund federal services for a further two years and also decreases the federal deficit by $23bn.There is also compensation for the $63bn automatic military and domestic spending cuts that occurred last January after a budget compromise was failed between the Democratic and Republican Parties.

Before the deal is made official it must pass a vote in the House recesses which could last for several weeks. Republican House Speaker John Boehner has supported the new deal and Republican Congressman Paul Ryan is confident that the new budget agreement will be passed, even though Congress remains politically split.

Paul Ryan and Democratic Senator Patty Murray are chairs of the House and Senate budget committees respectively and have led the cross-party budget deal after the division over federal spending. Rather than raising taxes, the new deal will take bigger pension contributions from newly hired federal workers as well as adding new federal costs, such as a $5 surcharge on airport security fees.

President Barack Obama has stated that the new deal doesn’t include everything that he would like but is a good compromise, “designed in a way that doesn’t hurt our economy”. A compromise between the divided parties at this stage is crucial to keep the U.S government fully functional and prevent damaging spending cuts being initiated in areas that are already struggling.

Financial services company Standard & Poor’s evaluate that the October shutdown cost the U.S economy $24bn. An estimate from government officials says that the new deal will not only prevent this financial waste, but create $85bn over a ten year period and repay $20bn of America’s $17 trillion debt.