Congress on Thursday passed a budget that covers the next five and half months, sealing last week's deal to avert a shutdown, with President Barack Obama set to sign it into law.
The House and Senate passed the $1.049 trillion measure that will make $38.5 billion in cuts to current federal spending and will be $78.5 billion less than Obama requested last year for fiscal 2011, which ends on September 30.
The budget easily passed. The House voted 260-167 in favor and the Senate passed it 81-19.
Washington has now set its sights on dual goals that will be linked even if rhetoric says otherwise.
A vote on raising the nation's $14.3 trillion debt ceiling and the 2012 budget debate, which has implications for the next decade, are expected to be the major issues for Congress in the next several months.
Failing to raise the debt ceiling within the next few months will mean that U.S. would default on some of its obligations. Although both Republicans and Democrats have indicated a need and willingness to raise the ceiling, Republicans such a move to be accompanied by large deficit reduction measures. Democrats have already said deficit reductions are necessary.
The next budget, according to both Democrats and Republicans, is expected to cut trillions of dollars from the deficit over the next decade.
In sheer amounts of deficit reduction, the two sides are not very far apart although the timing is different by two years. Republicans have proposed $4.4 trillion in deficit reductions over the next decade. Obama, as leader of the Democratic party, has proposed $4 trillion in reductions over the next 12 years.
The balance of spending levels and taxation will be the key. The debate will be on how to achieve those deficit reductions, with Democrats favoring higher taxes and lower spending cuts and Republicans favoring larger spending cuts as a priority.
Republicans have proposed $5.8 trillion in spending cuts over the next decade. Obama has proposed $2 trillion in cuts over 12 years.
The debate is already becoming a 2012 campaign issue.
On Thursday in Chicago, Obama spoke to supporters about the early stages of his campaign for re-election in 2012, alluding to the principles that guided last week's deal on spending cuts.
Last week we were able to prevent a government shutdown. And the reason we were able to do it was because we agreed to spending cuts, but we insisted on protecting investments in things like education and medical research, Obama said.
But now we've got to reign in this long-term deficit and deal with this long-term debt because it threatens our financial stability. We won't be able to do all those good things if we don't get our fiscal house in order.
House Speaker John Boehner said on Thursday on Fox News that the bill's passage was simply a first step.
I'm not jumping up and down, thrilled do death with this deal. But it's the best we could get considering the Democrats control the Senate and the Democrats control the White House, and they don't want to cut anything, Boehner said.
He said the bill was expected to cut $315 billion from the federal budget over the next decade.
Boehner also put the spending cuts in a political context.
This agreement will cut $78.5 billion from what the president wanted to spend this fiscal year. And if Republicans had not won the election in the House last November, I'll guarantee you they would have spent $78.5 billion more, he said.
Sen. Charles Schumer, D-NY, who is also a top spokesman for his party's leadership, said on Thursday that Republicans would have to yield on increasing taxes in order to reduce future deficits during negotiations for the 2012 budget. Boehner and fellow Republican, Senate minority leader Mitch McConnell have said spending cuts are the priority.
Republican leaders in Congress will lose credibility on the deficit if they put on ideological straitjackets and dig in their heels on protecting tax breaks for millionaires, Schumer said. To rule out revenues right away would men scuttling any deficit talks before they even begin.