Obama signs bipartisan U.S. budget deal, defence bill

Rounding out a tough and frustrating year, U.S. President Barack Obama signed a bipartisan budget deal Thursday easing spending cuts and a defence bill cracking down on sexual assault in the military, as the president and Congress began pivoting to the midterm election year ahead.

Obama put his signature on both hard-fought bills while vacationing in Hawaii, where he has been regrouping with his family since Saturday. The bill signing marks one of Obama's last official acts in a year beset by a partial government shutdown, a near-default by the Treasury, a calamitous health care rollout and near-perpetual congressional gridlock.

Although the budget deal falls short of the grand bargain that Obama and congressional Republicans once aspired to, it ends the cycle of fiscal brinkmanship for now by preventing another shutdown for nearly two more years.

But the rare moment of comity may be short-lived. Hanging over the start of the year is a renewed fight over raising the U.S. borrowing limit, which the Treasury says must be resolved by late February or early March to avert an unprecedented default. Both sides are positioning behind customary hard-line positions, with Republicans insisting they want concessions before raising the debt limit and Obama insisting he won't negotiate.

The last vestiges of 2013's legislative wrangling behind him, Obama's attention turns now to major challenges and potential bright spots in the year ahead. In late January, Obama will give his fifth State of the Union address, setting his agenda for the final stretch before the 2014 midterm elections, in which all of the House and one-third of the Senate are on the ballot.

Midterm elections loom in 2014

The elections could drown out much of Obama's effort to focus attention on his own, key agenda items.

Those include his signature health care law. The critical enrolment period for new insurance exchanges closes on March 31. Also at mid-year, Obama will be seeking to secure a comprehensive nuclear deal with Iran before a six-month deal struck in November runs out.

"Hopefully the president has finally learned that if he wants a productive second term we need to focus on finding areas of common ground," said Brendan Buck, a spokesman for House Speaker John Boehner.

Wary of letting expectations get too high, Obama's advisers have been careful not to read too much into Congress' success in trumping pessimistic expectations and pulling off a modest, end-of-year budget deal.

In an email on Thursday, senior Obama adviser Dan Pfeiffer called for a renewed focus in the new year on job creation, an unemployment insurance extension and raising the minimum wage.

"While it's too early to declare a new era of bipartisanship, what we've seen recently is that Washington is capable of getting things done when it wants to," Pfeiffer said. "There's an opportunity next year for this town to do its job and make real progress."

The product of intensive talks before lawmakers left Washington for Christmas, the budget deal alleviates the harshest effects of automatic budget cuts on the Pentagon and domestic agencies. It reduces those cuts, known as the sequester, by about one-third, restoring approximately $63 billion over two years.

A projected $85 billion in savings are located elsewhere in the deal, including increases in an airport security tax and a fee corporations pay to have pensions guaranteed by the government. Also included: a contentious provision to pare down annual cost of living increases in benefits for military retirees under age 62. Those cuts will save the government about $6.3 billion over a decade.

With lawmakers eager to leave town for the holidays and Republicans hoping to keep the focus on problems with Obama's health care law, the deal passed with bipartisan support in both the Democratic-controlled Senate and the Republican-controlled House despite opposition from tea party groups that lined up to oppose it, arguing the deal would raise spending.