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Barack Obama speaks at the White House last night Carolyn Kaster/AP/Press Association Images
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US government avoids shut down after last minute deal on budget spending

The ‘historic’ agreement came just an hour before government funding was due to run out forcing thousands of government workers to take leave.

PRESIDENT BARACK OBAMA and congressional leaders reached a historic agreement late Friday night to cut about $38 billion in spending and avert the first federal government shutdown in 15 years, which had been mooted.

Obama hailed the deal as “the biggest annual spending cut in history.” House Speaker John Boehner, a Republican, said that over the next decade it would cut government spending by $500 billion — and won an ovation from his rank and file, tea party adherents among them.

“This is historic, what we’ve done,” agreed Senate Majority Leader Harry Reid, D-Nev., the third man involved in negotiations that ratified a new era of divided government.

They announced the agreement less than an hour before government funding was due to run out, instantly turning hundreds of thousands of furlough notices for federal workers into historical relics.

The shutdown would have closed national parks, tax-season help lines and other popular services, though the military would have stayed on duty and other essential efforts such as air traffic control would have continued in effect.

On side issues — “riders,” the negotiators called them — the Democrats and the White House rebuffed numerous Republican attempts to curtail the reach of the Environmental Protection Agency.

They also sidetracked their demand to deny federal funds to Planned Parenthood, a health care services provider that is also the nation’s largest provider of abortions.

Under the accord, the issue will come to a vote in the Senate under terms guaranteed to end in its defeat.

Anti-abortion lawmakers succeeded in winning a provision to ban the use of federal or local government funds to pay for abortions in the District of Columbia.

One of Boehner’s priorities, a program that lets District of Columbia students use federally funded vouchers to attend private schools, was included.

In addition, the Senate will vote on proposals to deny federal funding to implement the year-old health care law. It is certain to fall short of the required 60 votes but will place Democrats on the record.

The long-term deal in hand, lawmakers raced to pass an interim measure to prevent a shutdown, however brief, and keep the federal machinery running for the next several days.

The Senate acted within minutes, and even though it took the House longer. White House Budget Director Jacob Lew issued a directive saying that in view of the agreement, “agencies are instructed to continue their normal operations.”

The deal came together after six grueling weeks and an outbreak of budget brinksmanship over the past few days as the two sides sought to squeeze every drop of advantage in private talks.

In one dramatic moment, Obama called Boehner on Friday morning after learning that the contours of the emerging deal they had reached with Reid in the Oval Office the night before had not been reflected in the pre-dawn staff negotiations and the whole package was in peril of falling part.

According to a senior administration official, Obama told Boehner that they were the two most consequential leaders in the United States government and that if they had any hope of keeping the government open, their discussions had to be honored and could not altered by staff.

Despite the accomplishment, officials noted it marked only a first step. Republicans intend to pass a 2012 budget through the House next week that calls for sweeping changes in Medicare and Medicaid and would cut domestic programs deeply in an attempt to gain control over soaring deficits.

And the Treasury has told Congress it must vote to raise the debt limit by summer — a request that Republicans hope to use to force Obama to accept long-term deficit-reduction measures.

“We know the whole world is watching us today,” Reid said earlier in a day that produced incendiary, campaign style rhetoric as well as intense negotiation.

Reid, Obama and Boehner all agreed a shutdown posed risks to an economy still recovering from the worst recession in decades.

- AP