US Congress averts government shutdown The US Congress approved legislation to extend funding for the government until the end of September, averting a shutdown and blunting the impact of $85bn in budget cuts for a handful of federal agencies. The votes in the House of Representatives on Thursday morning and the Senate on Wednesday night were both overwhelmingly bipartisan, a sign of the uncomfortable truce that has set in on Capitol Hill over fiscal policy - at least on the simplest matter of keeping the government operating. But lurking in just a few months is a new fiscal flashpoint since the US will need to raise its borrowing limit, probably by August. This process, which requires congressional approval, was amicably suspended in February but was deeply fraught in August 2011, risking a dramatic US default on its debt. At this stage, there is no clear path to an agreement on lifting the debt ceiling between congressional Republicans on one side and the White House and its Democratic allies on the other. In recent weeks, after President Barack Obama held a rare series of meetings with US lawmakers of all political stripes, hopes were raised that a new bipartisan fiscal bargain could be struck to reform taxes and big government programmes, cutting spending and raising revenue for deficit reduction. However, Republicans - particularly in the House - remain opposed to any new tax hikes, especially after they agreed to higher levies on wealthy households in January, and Democrats will not consider cutting social programmes unless their opponents back off that position. In addition, when it comes to the debt ceiling, Republicans are still insisting on their 2011 stance that every dollar of increase in the borrowing limit should be matched by an equal amount of spending cuts. Democrats say the debt ceiling should be increased regardless of any accompanying fiscal measures, since it reflects previous spending and tax decisions already made by Congress. At a press conference on Thursday, John Boehner, House speaker, stood by his demands and gave little indication that they may be softened. "Dollar for dollar is the plan," Mr Boehner said. We have had some discussions but not any big discussions at this point. Gabe Horwitz, director of the economic programme at Third Way, a centrist Democratic think-tank, said it is "too soon to tell" what the political dynamic will be on the debt limit. He believes House Republicans are "not yet unified on their approach" and will try to come together on a strategy after the looming two-week congressional recess. Meanwhile, the question for Mr Obama is whether he will continue to engage with Republicans - particularly ones in the Senate who are more sympathetic to raising some revenue - to catalyse a sweeping deficit agreement. The president's recent actions with Republicans are definitely good, the question is can that be sustained? Does he take a big deal and barnstorm the country with it?," Mr Horwitz said. But for now, cuts that began early this month - worth $85bn through the end of September and $1.2tn over a decade - are unlikely to be reversed or replaced any time soon. Rather, in its funding bill approved this week, Congress included provisions designed to help several government agencies administer the cuts more easily, allowing them to pick and choose which programmes to curb. Those departments that were given a wider berth include the Pentagon, veterans affairs, justice, agriculture, commerce, homeland security, the Food and Drug Administration, the National Science Foundation and Nasa. Because of the added flexibility in the bill, the Pentagon said it would delay issuing civilian furlough notices for two weeks. This would allow it to "analyse the impact of the [legislation] on the department's resources," said George Little, the Pentagon press secretary. Mr Little said no decisions had been made on whether the total number of furlough days would be changed, but added: " We believe the delay is a responsible step to take in order to assure our civilian employees that we do not take lightly the prospect of furloughs and the resulting decrease in employee pay." So far public outrage at the automatic cuts has been relatively subdued, since the effects are being felt slowly, and furloughs are not expected to hit until next month. As these effects become more prominent, it could also put more pressure on lawmakers to strike a deal. Economists have estimated that the cuts will still account for a roughly 0.5 percentage point hit on US growth this year. Michael Feroli, a senior economist at JPMorgan, said this is a "pretty significant drag" but by averting a shutdown and so far avoiding a new brush with default, "we have taken out the tail risk." "It's bad, it could have been worse," Mr Feroli said.