Republicans vow to continue the war against Obama's spending

(EPA)

With the ink barely dry on Friday night's budget deal that averted – if only barely – a government shutdown, emboldened Republican leaders served notice yesterday that their party's crusade to curb federal spending and shrink the size and role of government in Washington had barely begun.

After bulldozing Democrats and President Barack Obama into accepting a package that includes $38bn (£23bn) in cuts in the remainder of this fiscal year, Republicans last night were re-arming for the next big battles: debates on setting the 2012 budget and, more crucially for now, on raising the national-debt ceiling.

"There comes at times leverage moments, a time when the President will capitulate to what the American people want," said Eric Cantor, the majority leader in the House of Representatives. "They don't want to raise taxes, they don't want borrowing to continue out of control. This spending deal that was cut this week was only the beginning."

If there was relief in the White House that negotiators managed to strike a compromise on this year's budget – just ahead of a midnight deadline on Friday when a partial shutdown of government services would have begun – it was merely of the short-lived kind.

In the rounds ahead, the stakes will be higher and the combat more fierce. America's genuine fiscal mess, it is now clear, will come to dominate next year's presidential contests.

While the $38bn spending cuts – the fine-print details of which were still not publicly available yesterday – is small change in relation to America's fiscal problems, it sets a template for cuts in the years ahead that reflects small-government Republican priorities far more than it does Democratic ones.

Since taking office, the President has argued both at home and with other world leaders that serious austerity steps must wait so long as the economic recovery remains fragile, as it surely is in the US, where significant employment and housing-market problems remain.

But the Republicans, buoyed by the October midterm elections that gave them control of the House of Representatives with Tea Party insurgents in their ranks, are more than ever to be in the driving seat. Exhibit A: the deal struck on Friday, even if some policy demands on abortion and women's health were not met.

Already on the table is a draft 2012 budget authored by the Republican representative Paul Ryan, which has shocked many in Washington if only because it would dare to tackle areas that have until now been taboo: the runaway spending on Medicare and Medicaid, the health programmes for the elderly and the poor. Mr Ryan proposes a near privatisation of both programmes. It is a step that will be anathema to liberals.

Not even the Democrats are pretending anymore that the country's deficit difficulties are not grave, however. Mindful of criticism from his own ranks that he has shown insufficient leadership on this issue, Mr Obama is set to make a speech on Wednesday laying out what officials said would be his vision for cutting into the country's debt and restoring balance to the federal budget in the years ahead.

The 2012 budget is one thing, but more worrying to the administration right now is the approach it must make to Congress to authorise an increase in the debt ceiling.

According to the Treasury, the margin for it to keep honouring all its financial commitments will run out in early May. If Congress baulks, one consequence could be America defaulting on its debt, something most economists consider unthinkable.

The Republicans again made it clear last night that Mr Obama's request that Congress approve a so-called "clean" bill to approve the debt-ceiling increase, without conditions on further draconian spending cuts and other policy measures – for example on women's reproductive health – is a non-starter.

"The President just can't waltz in and say: 'We're going to have a debt crisis if we don't raise the debt limit, Congress,'" remarked Alabama Senator Jeff Sessions.

"And we're not going to have any changes and I'm not going to support any changes," Senator Sessions added. "He's going to have to meet Congress halfway – really, [meet] the American people halfway."

John Boehner, the House Speaker, is seen as having been strengthened by Friday night's deal – not least because he managed to corral those Tea Party-backed representatives who had wanted even more out of it.

Mr Boehner also relayed the same uncompromising message about the upcoming debt-ceiling struggle. "The President says: 'I want you to send me a clean bill,'" the Speaker said. "Well guess what, Mr. President? Not a chance."

The budget battlegrounds

THIS ROUND

What the Republicans got:

n $38bn in cuts for the balance of this budget year. That was an increase from the $30bn of cuts to which the Democrats had earlier agreed. The Republicans also succeeded in attaching to the budget some limited policy measures, including new limits on taxpayer support for abortions in Washington DC.

What they didn't get:

* Attached measures that more broadly reflected conservative social policy that would, for example, have taken funding away from Planned Parenthood Clinics that provide healthcare to five million American women.

NEXT ROUND

What the Republicans want:

* Cuts, cuts and more cuts – in both spending and tax rates – as well as a clear undertaking from the White House and Democrats to accede to a fundamental revamping of Medicare and Medicaid – the healthcare programmes for the elderly and poor. This will be bitterly opposed by most Democrats.

What the Democrats want:

* Mr Obama's own ranks want a path to lowering the budget deficit that does not include huge tax cuts for the rich and preserves as far as possible the safety net for the elderly and poor.