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UPDATE 2- Deal to quell U.S. budget wars sails through House vote

David Lawder and Richard Cowan
Thursday, 12 Dec 2013 | 7:02 PM ET

* Modest budget bill wins strong bipartisan majority in House

* Spending levels set for two years; shutdown threat eased

* Measure set for Senate passage next week

WASHINGTON, Dec 12 (Reuters) - A breakthrough budget deal that avoids a government shutdown in January and blunts automatic spending cuts easily won passage in the U.S. House of Representatives on Thursday, setting the stage for nearly two years of fiscal peace in Congress.

The 332-94 bipartisan vote sends the measure to the Senate, which is expected to pass it next week despite the objections of conservative political groups that complain it violates a core goal of cutting government spending.

The modest deal ends three years of partisan warfare in Congress over federal spending and taxes that fueled a 16-day government shutdown in October and twice brought the United States to the brink of default, rattling financial markets.

It was a victory for Republican House Speaker John Boehner, who has been continually stung by rebukes from the conservative, Tea Party wing of his caucus on fiscal issues. This time, however, he demonstrated that he could smoothly steer a budget compromise through the deeply divided chamber and that Republicans were capable of avoiding the brinkmanship that has marked the past three years.

Boehner has struggled since 2011 to get his Republicans to back him on major bills, but on Thursday he sailed to victory as a strong majority of the House's 232 Republicans defected and voted in favor of the bipartisan budget bill.

"Is it perfect, does it go far enough? No, not at all," Boehner said of the budget deal during a day-long House debate.

"It's going to take a lot more work to get our arms around our debt and our deficit but this budget is a positive, positive step in that direction," he added.

A key test of whether the deal becomes a template for more cooperation with Democrats will come in the first quarter of 2014, when Congress needs to raise the federal debt limit again. The borrowing cap has become a perennial pressure point for Republicans to make demands for deep spending cuts.

At least for now, Republicans were showing little appetite for threatening an historic Washington default on its debt.

The pact approved on Thursday does nothing to stem the worrisome growth of the $17 trillion federal debt, but it locks in spending levels for two fiscal years, eliminating the threat of another federal shutdown until Oct. 1, 2015.

HIGHER NEAR-TERM SPENDING

By allowing a $63 billion increase in spending on federal agencies and discretionary programs over two years in exchange for other budget savings, it reduces the harmful effects of the across-the board sequester cuts that have hit every government program from medical research to military weapons development.

In a bitterly divided, largely unproductive Congress that has not passed a budget or normal spending bills since 2009, the deal represented a breakthrough of sorts in finding some common ground.

House Budget Committee Chairman Paul Ryan, who negotiated the deal on behalf of Republicans with his Democratic counterpart, Senator Patty Murray, predicted that Congress would return to its normal budget process. He hailed the fact that the deal provides some $23 billion in additional deficit reduction over 10 years.

"This bill saves more than if we did nothing," Ryan said.

Those savings allowed many Republicans to set aside their objections to higher near-term spending and may help burnish Ryan's credentials as a pragmatic deal-maker as he considers whether to seek the Republican presidential nomination in 2016.