WASHINGTON: Ultra-conservatives in the US House softened their demands for deep spending cuts to domestic programmes, heightening the odds the two parties can reach a spending agreement and avert a Jan 20 partial government shutdown.

The shift came after the House has failed to pass bills at the lower spending levels demanded by the House Freedom Caucus, a group of Republican Party hardliners with tremendous influence in the narrow Republican majority.

The US government is operating under a temporary spending bill passed this month that funds part of the government through Jan 19 and the rest through Feb 2.

Differences between the Republican House and Democratic Senate threatened shutdowns after those dates because new Speaker Mike Johnson has vowed not to pass any more temporary spending extensions.

The Freedom Caucus had been pushing for US$120bil in cuts below the US$1.59 trillion budget cap level agreed to in a June debt ceiling deal between President Joe Biden and Congress. The caucus opposed that agreement.

Their softened stance now gives Johnson room to negotiate a bipartisan spending deal and resolve a litany of other differences, including a Senate attempt to spend more than the debt ceiling cap allows.

“We realise that US$1.47 is not going to happen,” Freedom Caucus chairman Scott Perry said of his group’s earlier demands for a cap of US$1.47 trillion.

Perry said that the group can go along with the higher budget caps. In return, caucus members will insist that no budget gimmicks are used to allow spending above that number.

That would mean that a handshake side deal struck between Biden and former speaker Kevin McCarthy to count US$20bil in future Internal Revenue Service cuts would have to be thrown aside. Senators from both parties are also attempting to add US$14bil in spending by designating it an “emergency” not subject to the cap.

“No more gimmicks,” said Perry. “Most of the House voted for it, most of the Senate voted for it. That’s where we have to be,” he added of the caps.

The House has struggled to pass spending bills adhering to the Freedom Caucus’ number given a refusal of Democrats to go along and divisions among Republicans. Bills funding the departments of Agriculture, Transportation, Housing and Urban Development, Treasury, Commerce, Justice and Labor among others have failed to pass.

Congressional leaders are hoping to soon agree on top-line levels for the fiscal 2024 spending bills to avoid the shutdowns.

Johnson told Senate Republicans behind closed doors Wednesday that if such deal on the full year appropriations bills is not struck by Feb 2, the House will pass a full-year stopgap bill with programmes frozen at current levels.

 - Bloomberg