Spending cuts: Congress passes $38.5bn budget cut bill

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House Speaker John Boehner on Wednesday
Image caption,
Republicans led by House Speaker John Boehner earlier pressed for $61bn in cuts

The US Congress has passed a budget bill that would cut $38.5bn (£23.6bn) in government spending over the rest of the fiscal year.

The measure, which was agreed on Friday, passed by 260 votes to 167 in the House and 81 to 19 in the Senate.

The bill is expected to be signed by President Barack Obama later on Thursday.

With its passage, Republicans and Democrats will turn their attention to a fight over next year's budget.

The budget bill was crafted after weeks of fraught negotiations between the White House and congressional Democrats and Republicans, six months after the last budget expired.

During negotiations, Republicans pushed for greater spending cuts than Democrats had been willing to concede.

The ballooning US deficit is forecast to reach $1.5 trillion (£921bn) this year and is set to be a top issue in the 2012 election campaign, with Democrats and Republicans offering contrasting visions on how to reduce it.

Jacob Lew, director of the White House Office of Management and Budget, said on Thursday that all parties believed it would be "unthinkable" for the US not to meet its debt obligations.

'Stop the bleeding'

The 2011 budget bill passed by Congress, which covers the fiscal year up to 30 September, slashes some domestic spending but also relies on accounting changes that some economists say create the illusion of deeper spending cuts.

Though Republican negotiators led by Speaker John Boehner in the House of Representatives initially pressed for $61bn in budget cuts, many analysts in Washington have scored the budget bill as a victory for the Republicans.

"It stops the bleeding. It halts the spending binge and starts us moving us back in the right direction," Mr Boehner said of the legislation on Thursday.

"Does it cut enough? No. Do I wish it cut more? Absolutely," he added.

The debate over the budget for the fiscal year 2012, which begins on 1 October, has already begun in earnest.

'Shared sacrifice'

Last week, Republican House budget committee chairman Paul Ryan introduced a budget proposal that would slash $6.2 trillion in government spending over the next decade.

It would achieve those cuts in large part by requiring the elderly to pay more for their healthcare than they do currently and cutting healthcare and social programmes for the poor.

It would lower taxes for the wealthy, a move fiscal conservatives say will boost US economic growth.

Mr Obama on Thursday defended his call for raising taxes on the wealthy, made in a speech a day earlier focused on debt reduction.

Mr Obama said all Americans must share the burden of reducing the long-term budget deficit.

"It's not appropriate for us to ask for sacrifices from everybody except for the 2% of Americans who are doing best," he said.

His fiscal policy plan, set out on Wednesday, also includes changes to social programmes.