Debt Ceiling Vote, '12 Budget are Next Major Battles as Government Shutdown 2011 Averted

A debt ceiling vote and the 2012 budget will be the next major fiscal battles facing the U.S. throughout the rest of 2011, as Washington looks ahead after lawmakers in the House and Senate averted a shutdown in a last hour deal to fund the government for the next six months.

[B]ecause Congress was able to settle its differences, that's why this place is open today and everybody's able to enjoy their visit, Obama told visitors during a short visit to the Lincoln Memorial on Saturday. And that's the kind of future cooperation I hope we have going forward.

A deal to avert the shutdown was agreed to in the waning hours of a budget extension that ran out at midnight. Lawmakers passed a measure that will fund the federal government until next Friday as they craft a final bill to fund the government until September 30 that will get a vote sometime next week.

Major points of division ahead of the agreement, according to top Democrats, included a Republican request to include a policy attachment to the bill that would remove funding for family planning. Democrats said another Republican request would have placed new restrictions on the Environmental Protection Agency.

House Speaker John Boehner maintained comparative silence about specifics in negotiations, in contrast to Democratic leaders which often spoke about specific cuts in the budget and policy initiatives being considered in closed-door negotiations.

Boehner maintained publicly that the most important issue was cutting spending.

Defunding Planned Parenthood was a major sticking point in the last day of the crisis as Senate Majority Leader took to the Senate floor to say that the shutdown would happen if Republicans kept that policy demand in place.

Passing policy changes related to family planning laws would have removed about $300 million in federal funding from women's preventive care and health services organization Planned Parenthood. The organization is the largest provider of abortions in the country, although it is legally forbidden to use any federal funds for its abortion services.

President Obama alluded to Planned Parenthood and environmental issues.

We also made sure that at the end of the day, this was a debate about spending cuts, not social issues like women's health and the protection of our air and water. These are important issues that deserve discussion, just not during a debate about our budget, Obama said on Friday.

Reid and Boehner agreed in a joint statement that Friday's agreement on cuts was historic.

We've agreed to an historic amount of cuts for the remainder of this fiscal year, as well as a short-term bridge that will give us time to avoid a shutdown while we get that agreement through both houses and to the President, Reid read from a statement on the Senate floor on Friday.

The agreement calls for a $78.5 billion less than Obama's fiscal 2011 request for $3.69 trillion, about 2 percent of the total.

Debt Ceiling and 2012 Budget Battles Ahead

Major developments in the battle of the budget beyond the immediate shutdown crisis also arose during the week. Two key issues that will become inextricably linked will be raising the debt ceiling and passing a 2012 budget that will also put in place spending policies that will affect spending in the years to come.

Among the major federal programs that could see big changes, and big political arguments are Medicare and Medicaid, large-scale programs that work in conjunction with states that have been identified as some of the biggest liabilities the government will face in the next few years.

The current U.S. debt ceiling stands at $14.294 trillion. Republicans are seeking to reduce the federal deficit by $4 trillion over the next decade, according to a proposal for the 2012 budget unveiled Tuesday. In Mid-February, Obama's proposal sought $1.1 trillion in deficit reductions over the same period.

The coming months will see lawmakers and the White House engaged in a battle to determine how much should be cut going forward.

Obama's agenda has called for investments in infrastructure, education and innovation which require keeping spending levels in certain categories higher than some Republicans have shown willingness to agree to.

On Tuesday House Budget Committee Chairman Paul Ryan elaborated on the Republican 2012 budget proposal, which he entitled the Path to Prosperity.

Instead of locking in the spending spree of the last two years, this budget cuts $6.2 trillion in spending from the President's budget over the next ten years. Instead of letting deficits spiral out of control, it reduces this year's $1.6 trillion deficit by one-third and puts an end to the era of trillion-dollar deficits. Instead of adding $13 trillion to the debt over the next decade and trillions more in years to come, as the President's budget does, this Path to Prosperity budget takes the steps necessary to avert a debt crisis and provides job creators with the confidence they need to start hiring today, he said.

Sen. Mitch McConnell on Friday congratulated Boehner and Reid for their outstanding work during this difficult negotiation but also pointed to battles in the coming months.

These reductions ... are in the billions. Once we get through this process by the end of next week, we will move on to a much larger discussion about how we save trillions, by enacting hopefully on a bipartisan basis a budget that genuinely begins to get on top of this problem.

McConnell said that the problem was $14 trillion in debt, and over $53 trillion in unfunded liabilities.

The Obama administration has asked Congress to raise the debt ceiling. This week Treasury Sec. Timothy Geithner said the U.S. would reach its legally mandated debt ceiling of $14.294 trillion no later than May 16.

Geithner told Reid in a letter on April 4 that the Treasury could take certain extraordinary steps to postpone the date that the U.S. would default on its obligations by about 8 weeks.

He said there would be no headroom to borrow within the limit after July 8.

McConnell said future commitments to reduce the debt had to be taken.

The President has asked us to raise the debt ceiling. And Senate Republicans and House Republicans and I hope many Democrats as well are going to say, Mr. President, in order to raise the debt ceiling, we need to do something significant about the debt. My definition of significant is that the markets view it as significant, the American people view it as significant and foreign countries view it as significant, McConnell said.

So for tonight, again, I congratulate the Majority Leader and the Speaker. This is an important first step, but just the beginning of what we need to do to get our house, our fiscal house, in order.

Reid said shortly thereafter: The Republican leader is right. We have a lot of work to do.

Obama also spoke about the work ahead in a speech late Friday, commenting on the agreement.

It's my sincere hope that we can continue to come together as we face the many difficult challenges that lie ahead, from creating jobs and growing our economy to educating our children and reducing our deficit.

Rep. Hal Rogers, the Chairman of the House Appropriations committee said the agreement on Friday will allow Congress to continue the trend of reductions, to dig our nation out of our dangerous deficits and debt for years to come.