–House GOP Set to Unveil Another FY11 Stop-Gap Bill Friday
–Congress Expected to Pass Another Short-Term FY11 Spending Bill
–Lawmakers Begin to Gear Up For FY12 Budget Battle
–Bipartisan Group of Senators Continue To Work Quietly on Big Deal

By John Shaw

WASHINGTON (MNI) – With many fiscal balls flying through the air,
congressional leaders and the White House are trying to deal with
short-term challenges while paying attention to ominous long-term
problems.

The most immediate challenge is to keep the federal government
running when the current stop-gap spending bill expires next Friday.

House Republican leaders have indicated they will offer, as early
as Friday, another short-term extension of between two and three weeks
as negotiators try to reach agreement on a plan to complete work on the
2011 fiscal year budget.

The 2011 fiscal year began Oct. 1 and the government has been
running on a series of short-term funding bills.

Most analysts do not expect a quick agreement on the FY11 budget.

Vice President Joe Biden held one round of talks with key
congressional leaders last week on completing the FY11 budget, but has
been overseas all week so the talks have been suspended.

Biden’s talks with Senate Majority Leader Harry Reid, Senate
Minority Leader Mitch McConnell, House Speaker John Boehner and House
Minority Leader Nancy Pelosi are expected to resume next week.

As a result of the first high-level budget meeting, the Senate
voted this week on both the House Republican plan to complete the fiscal
year 2011 budget and the Senate Democratic alternative.

The Senate first defeated the House GOP plan on a 44 to 56 vote.
Sixty votes were required to pass the bill. The Senate then defeated the
Senate Democratic plan on a 42 to 58 vote.

The House Republican plan would have funded government for the
balance of FY11 at about $61 billion below last year’s spending level
while the Senate Democratic alternative would have cut spending by about
$6.5 billion below last year’s level.

After the vote, Reid said it was time for both sides to compromise.
Another key senator, Chuck Schumer, said it is now time to approach the
budget stalemate with “fresh eyes and a new mindset.”

Schumer said the budget talks should expand beyond non-defense
discretionary programs to include other areas of the budget such as tax
policy and entitlements.

But House Speaker John Boehner said Thursday he does not support
expanding the current talks over discretionary spending in the FY11
budget, arguing that broader talks would “muddle” the focus on spending
cuts.

Boehner blasted Senate Democrats for failing to offer an aggressive
package of spending cuts. “They are not serious,” he said.

Boehner said he will continue to participate in bipartisan talks
over the FY11 budget led by Biden, but said “this is not going to be
easy.”

Boehner brushed aside the suggestion of several Senate Democrats to
expand the FY11 budget talks into the areas of taxes and entitlements.

“That’s the next budget process,” he said, referring to the coming
debate on the FY12 budget.

Senate Budget Committee Chairman Kent Conrad said this week that
the bipartisan group of senators is continuing to work on assembling a
long-term deficit reduction plan and is looking at the report of the
President’s Fiscal Commission as a template.

Conrad said that plan’s call for $4 trillion in 10-year savings is
of the “size and scope” that Congress should consider. He said he is
continuing to work with a bipartisan group of senators to “turn the
essence” of the plan drafted into legislation that would be considered
this year.

The Senate Budget Committee held a hearing this week featuring the
two chairmen of that panel, Alan Simpson and Erskine Bowles. They urged
Congress to agree on a deficit reduction plan soon.

Bowles said “the fiscal path we are on today is simply not
sustainable.” He added, “I’m really concerned,” about the U.S.’s fiscal
policy, adding that the U.S. is on pace to owe $1 trillion a year just
on interest payments by 2020.

“I don’t know where the tipping point is,” Simpson said of the
soaring U.S. deficits and rising debt, but added that it is urgent for
Congress to begin to act soon.

Congress will also have to increase the statutory debt ceiling this
spring with the administration saying an increase will be needed no
later than the end of May and possibly by April.

** Market News International Washington Bureau: (202) 371-2121 **

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