The deal provides an additional week of funding for the federal government which was on the verge of a shutdown last week. However, as a compromise government support for the high-speed programme in 2011 will be reduced to $US 1 billion from the $US 2.5bn included in the 2010 budget, which has yet to be allocated.
The 2011 budget will run until the end of the fiscal year in October when it is approved later this week, and includes $US 38bn in total cuts, the largest domestic budget reduction in American history.
Republican speaker of the House of Representatives, Mr John Boehner, said that the budget agreement would help to boost the economy which has struggled to create jobs despite recovering since the recession, while Democratic Senate leader Mr Harry Reid expressed relief that an agreement had been reached.
"We didn't do it at this late hour for drama," Reid said. "We did it because it has been hard to arrive at this point."
Despite the cut backs, states' appetite for the high-speed programmes remains strong. The US Department of Transportation last week reported receiving 96 applications from 24 States, the District of Columbia and Amtrak for the $US 2.4 billion returned by Florida after governor, Mr Rick Scott, refused funding for the Tampa - Orlando high-speed project in February.
Amtrak's application includes requests for $US 1.3 billion for the Gateway Project in New York City, and to upgrade the North East corridor, which was previously excluded from the high-speed funding programme. Work on allocating the funds began last week.
"Demand is high because these leaders-Democrats and Republicans-have also seen the expanded manufacturing activity in Indiana, where the workers of Steel Dynamics are forging track" the DOT said in a statement. "They know that 30 other manufacturers and suppliers have agreed to build or expand operations in the US should they participate in high-speed rail projects. They know that our Buy America requirements ensure they'll be using American-made supplies and materials, so US companies, workers, and communities will receive the maximum economic benefit of our high speed rail investment."
President Barack Obama supports the DOT's assertion, which was reflected in his 2012 budget announcement on February 14 which called for a $US 8 billion of funding for the high-speed programme next year, and a $US 53 billion total investment in passenger rail over the next six years.
However, it is likely that the budget deadlock experienced this year will be repeated in 2012, spilling into the presidential campaign. And with Republicans determined to kill the high-speed rail programme and Democrats seemingly willing to compromise with the level of funding it receives, the initiative is likely to be a key deal maker in the budget struggles ahead.