U.S. budget deal nears amid conservative opposition

By Richard Cowan and David Lawder WASHINGTON (Reuters) - Budget negotiators in the U.S. Congress on Tuesday were wrapping up a tentative deal on a budget plan to avoid a January 15 government shutdown, amid warnings from conservative groups that they would oppose it. The plan does not purport to be any "grand bargain" that would slash the federal deficit. It remains uncertain whether it will pass both houses of Congress. But if it does, it could put an end for the time being to dramatic budget standoffs that have rattled markets in the past, allowing lawmakers to write annual spending bills in a more orderly fashion. Congress has not enacted a budget bill since 2009. Democratic Senator Patty Murray and Republican Representative Paul Ryan were planning to meet in the Capitol to sign off on the accord, although their respective staffers were still ironing out some important details, according to one Senate aide. Another Senate aide said that Murray, who chairs the Senate Budget Committee, will brief fellow Democrats on the outline of the plan at a closed-door lunch that is scheduled to begin at around 12:30 p.m. (1730 GMT). Over the past several weeks, Murray and Ryan have been hammering out a two-year budget deal that attempts to put an end to the budget chaos that has kept Democrats and Republicans in constant warfare since 2011. That warfare led to last October's 16-day government shutdown when agencies ran out of money. Barbara Mikulski, who heads the Senate Appropriations Committee that would have to carry out any budget deal, told reporters: "I am cautiously optimistic that we have a deal." Nevertheless, Murray and Ryan were still working on one of the thorniest parts of the accord: reductions in federal workers' retirement benefits that would help pay for slightly higher government spending on programs, including military ones. Democrats "are working to minimize ... the size of the cut that Ryan has sought," said one Senate aide. Ryan "is still working with Senator Murray to cut spending in a smarter way. They haven't reached an agreement yet," said William Allison, a Ryan spokesman. TARGETING REPUBLICANS As the two lawmakers and their staffs worked behind closed doors, conservative groups were waging a public campaign to defeat their efforts. Those groups hold sway with House Republicans and with the 2014 midterm elections coming into focus, their opposition to the deal could complicate its passage. In some cases, the groups are backing more-conservative primary challengers to Republican incumbents they view as too moderate. According to congressional aides, any tentative budget deal might allow spending to rise from the scheduled $967 billion for fiscal 2014 to around $1 trillion. While that increase in outlays would be offset by raising some government fees and possibly cutting federal workers' retirement benefits, conservatives were rallying against the deal, even before it was reached. Americans for Prosperity, which supports cutting taxes and government spending, called on congressional Republicans to "stand firm" in upholding a second round of across-the-board automatic spending cuts, which are scheduled to start in January. "Otherwise, congressional Republicans are joining liberal Democrats in breaking their word to the American people to finally begin reining in government over-spending that has left us over $17 trillion in debt," said AFP President Tim Phillips. If a Ryan-Murray deal is reached, it is expected to relax some of those cuts, which are known as "sequestration." Late on Monday, another conservative group, Heritage Action for America, an offshoot of the Heritage Foundation, announced that it also could not support the emerging budget deal. The group complained that such a deal would increase spending "in the near-term for promises of woefully inadequate long-term reductions." Club for Growth is waiting for the content of any deal before it passes judgment, said Barney Keller, a spokesman for the influential conservative group. Club for Growth has opposed past efforts to replace sequester that involved delaying the cuts. From the other end of the political spectrum, Democratic lawmakers have voiced opposition to any deal that takes a whack at federal workers' pensions without asking sacrifices from wealthier Americans. Democrats also have been pushing for an extension of federal benefits for the long-term unemployed, which are set to expire at the end of this month. Republicans have voiced opposition to the extension, citing a falling jobless rate. If Murray and Ryan wrap up their negotiations, a vote in the Republican-controlled House could come by Friday, when that chamber plans to recess for the year. If it passes the House, the Democratic-controlled Senate is likely to vote on it late this week or next week. Senate Democrats are banking on winning the support of at least five Republicans who want to ease the Pentagon's automatic spending cuts and avoid a budget standoff like last October's, which led to a 16-day government shutdown. Failure to craft and pass a budget deal could lead to another such shutdown on January 15, when current funds for most federal agencies are set to run out. (Reporting by Richard Cowan and David Lawder; Editing by Eric Beech)