The bipartisan deal lifts mandatory federal spending caps imposed under the 2011 Budget Control Act. Both Democrats and Republicans have said they were making progress on a budget that would increase spending limits for defense and non-defense programs.
Senate Democratic leader Chuck Schumer said an agreement being forged would increase funding for domestic programs like drug treatment and broadband infrastructure that Democrats want, as well as a military spending increase sought by Republicans.
The caps deal would mean Congress can finally work on a larger omnibus bill to fund the government.
Less than three weeks after the U.S. government shut down for three days after Democratic senators would not support a spending Bill that did not include protection for young undocumented immigrants, the threat of another shutdown loomed large this week.
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As fiscal conservatives castigated the spending increase as reckless, Democrats pushed for a provision to protect the roughly 800,000 young immigrants protected by the Obama administration's Deferred Action for Childhood Arrivals (DACA) initiative.
The budget deal is expected to pass the Senate but may encounter difficulties in the House. The conservative House Freedom Caucus has already indicated it will not support the spending increases.
In an attempt to avoid yet another government shutdown, Republicans and Democrats in the Senate reached an agreement on a two-year #budget deal.
Rep. Mark Meadows, R-North Carolina, said, "the good news is we're taking proactive steps to make sure that the government stays open and the vote tomorrow I think will be a fairly simple one for most of us to take and support".
Experts say that there is little hope for the latest House defense spending bill in the Senate.
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House Republicans can pass the bill without any Democratic support if no more than 23 of their own defect. The deal would also end - at least for a while - the prolonged congressional cycle of fiscal standoffs and short-term spending patches. Majority Leader Mitch McConnell also said he was hopeful. Non-defense spending would rise by $63 billion this year and $68 billion next year.
Among the victories claimed by Senate Democrats will be a new joint select committee charged with developing legislation by the end of calendar year 2018 that would address the pension crisis affecting retired mine workers, those in the Central States Fund and elsewhere. President Donald Trump rescinded the order establishing the program and gave Congress several months to reach an agreement on a permanent solution.
Trump threatened on Tuesday to upend budget talks by saying he would welcome a government shutdown if Congress were not able to agree to changes in immigration law that he said would prevent criminals from entering the country.
He said the budget deal was a "genuine breakthrough" after months of legislative logjams.
But Pelosi, who was part of the negotiations on the agreement, has warned that the deal is a no-go without a commitment from Speaker Paul Ryan to allow an open debate on immigration legislation.
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USA crude fell 2.08 percent to US$62.07 per barrel and Brent was last at $66.12, down 1.11 percent on the day. Emerging market stocks lost 2.74%, but the iShares MSCI emerging markets exchange-traded fund jumped 3.3%.
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