When Congress returns from vacation, budget fight looms

[August 27, 2015]  By Richard Cowan
 
 WASHINGTON (Reuters) - The U.S. Congress will soon embark on a high-stakes budget negotiation with President Barack Obama that, if productive, could give Republicans the increased military spending they want and Democrats the increased domestic spending they seek.

Alternatively, the federal government could shut down.

Scenarios in between these extremes are also possible, but congressional aides said outcomes were hard to predict since little behind-the-scenes progress was made on thorny issues during Congress's five-week summer recess. It ends Sept. 8.

Left unresolved, fiscal disputes could push lawmakers to the brink of shutdown by Oct. 1, or later in the year, possibly rattling markets already shaken by China.

Amid efforts to avoid a tax-and-spending crash, Congress will meet on Sept. 24 for a speech from Pope Francis. Leaders hope to avoid discord around then.

It is possible, said one Senate Democratic aide, that a package could emerge late in the year funding federal agencies through September 2016, raising the Treasury Department's borrowing authority to avoid a cataclysmic default and extending temporary tax breaks. All are pressing issues.

The "train wreck" would come if Congress, up against a Thanksgiving holiday deadline in November or a Christmas deadline in December, failed to pass such a catch-all package.

Senate Majority Leader Mitch McConnell and House of Representatives Speaker John Boehner will be key players, as always. They face a tough job balancing the demands of their Republican majorities in both chambers with crafting legislation that Obama, a Democrat, will accept.

Both McConnell and Boehner have long believed government shutdowns hurt their party's brand, but they have to deal with a strong and vocal faction of Tea Party conservatives that has shown little hesitation about playing the shutdown card.

TRUMP FACTOR

Further complicating the leaders' work will be demands from the huge cast of Republican presidential candidates, some of whom sit in the Senate. On Wednesday for example, Donald Trump said on Bloomberg TV that it would be "worth the fight" to resist raising the limit on government borrowing.

Republican Senator Ted Cruz, also a candidate, has led a charge to kill federal funding for Planned Parenthood after secretly taped videos showed technicians for the women's health organization gathering fetal tissue from abortions.

Cruz and other conservatives have tried to use must-pass spending bills, like the one coming due Oct. 1, as vehicles to kill Obama's healthcare law and immigration policies. The strategy has failed but has forced temporary agency shutdowns.

Another problem just around the corner is strict, government-wide spending caps that many in Washington see as too harsh, especially given the improving U.S. economy.

Republicans argue these caps hurt national security by under-funding the Pentagon and will likely push to ease spending limits for the fiscal year and increase military spending to more than $600 billion, up from the current $523 billion.

"I don't feel like everyone is resigned to busting the budget caps," said a Senate Republican aide. "Therein lies the real battle and I am not really sure what the final answer is."

(Editing by Kevin Drawbaugh and Cynthia Osterman)

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