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US lawmakers strike $1 trillion budget deal to avert shutdown

Published time: December 11, 2013 16:06
Senate Budget Committee Chairman Patty Murray (D-WA) and House Budget Committee Chairman Paul Ryan (R-WI) hold a press conference to announce a bipartisan budget deal, the Bipartisan Budget Act of 2013, at the U.S. Capitol on December 10, 2013 in Washington, DC. (T.J. Kirkpatrick/Getty Images/AFP)

Senate Budget Committee Chairman Patty Murray (D-WA) and House Budget Committee Chairman Paul Ryan (R-WI) hold a press conference to announce a bipartisan budget deal, the Bipartisan Budget Act of 2013, at the U.S. Capitol on December 10, 2013 in Washington, DC. (T.J. Kirkpatrick/Getty Images/AFP)

The threat of another painful US government shutdown is fading away, as Democrats and Republicans have agreed a $1.01 trillion spending limit by 2015. The news is putting global markets at ease, and investors are waiting for an end to easy Fed money.

The bi-partisan budget which President Obama said is a ‘good first step', will increase budget spending by $63 billion in 2014 and 2015 and cut $23 billion off the budget deficit over 10 years without hiking taxes.

Over the next two years, the $63 billion will help offset March’s sequestration cuts, which are automatic cuts that reduce the budget deficit and are heavy-handed on defense spending. The government will compensate for the spending increase by lifting airline passenger fees, and requiring higher contributions to federal pensions.

If sequestration cuts were re-approved, discretionary spending would be capped at $967 billion in 2014, with $520.5 billion allocated to defense spending, and $491.8 billion for non-defense spending.

The budget is a compromise for the Democrats, as spending over the next two fiscal years will be over $1 trillion, however, it doesn’t increase the US debt limit.

Republican leaders Eric Cantor and House Speaker John Boehner support the proposal, but it needs to be approved by Congress before it comes into effect.

When the plan is approved, it will avert government shutdowns in mid-January and again in October 2014.

Opposition is expected to come from Republicans like Marc Rubio, who gathered a large enough coalition to force the government into a shutdown over de-funding the 'Obamacare' health program.

The two-year budget agreement will hopefully usher in a new era of cooperation in Congress, which has been viciously divided over raising the debt ceiling to fund the budget.

Taper time?

The new era of calm set forth by the budget has raised investors' hopes that the US Federal Reserve will begin to taper its $85 billion per month bond purchases, which have helped stabilize financial markets following the 2008-2009 crisis.

A scale-back is expected under the new tenure of Janet Yellen, who will take over the reigns as the Central Bank Chair in February.

Economists are split on whether the ‘easy money’ has outlived its usefulness or if America’s economy truly still needs this financial lifeline.

Fed policy makers meet December 17-18 for their regular meeting when quantitative easing will once again be on the agenda. If the "in the coming months" statement, made by Ben Bernanke last May is finally fulfilled, policymakers will start minor scaling of the bond-buying program.

Comments (7)

 

mergon 19.02.2014 13:36

Whats the worst thing that can happen if everybody just did not vote for these corporate people that they call politicians , im in the UK and the only thing i put on any ballot paper is NONE OF THE ABOVE , because they are all about money for the rich and more poverty for the poor
If the MP,S and ministers paid back all of the money they stole from our system we would not have a national debt !
Vote for them while they strip out every penny we have left ,i dont think so !

 

Rodney 09.02.2014 16:52

US Lawmakers should read Torrorists States shysters...
They are all crooks and make rules to suit padding their pockets ONLY..

 

Steven Severn 14.12.2013 15:26

An estimated 25-75 $trillion in debt and the US elites see amassing even more debt as a solution to the problem? It does reveal the lack of constructive options left to a failing Western capitalism

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