After three years of stalemate, a debt ceiling crisis and sequestration, the Associated Press reported on Tuesday that negotiators led by Senate Budget Committee chairman Patty Murray (D-Wash) and House Budget Committee chairman Paul Ryan (R-Wisc) reached a budget deal. It’s a two year deal, funding the government through the fiscal year ending on September 30, 2015. If ratified by the full House and Senate, it should preclude another government shutdown over the next two years and provide some needed policy stability for the struggling economic recovery.
Negotiators from both parties wanted to avoid another government shutdown in January, and they wanted to ease across the board sequestration cuts hitting defense and everything from parks, medical research, environmental programs, food safety, job training and infrastructure spending. Sequestration, a product of the 2011 fight over the federal debt ceiling, was on automatic pilot impacting budgets more severely each year it remained in effect.
This deal restores $63 billion of the sequestration cuts, and it allows total discretionary spending, including Pentagon spending and the operating budgets of domestic executive branch agencies, to increase by just over $1 trillion over each of the next two years.
To offset the spending increases, federal employees will be required to pay a higher share towards their pensions, increases in military pensions will be trimmed, airline passengers will pay higher fees and employers will pay higher premiums to the Pension Benefit Guarantee Corporation, the government entity that steps in to partially pay the pension obligations of bankrupt companies. After these revenue offsets, the total cost of the deal is $85 billion.
So a deal has been struck. It’s a small deal, not the grand bargain sought in previous negotiations between President Obama and House Speaker John Boehner (R-Ohio). In 2011, the two politicians sought an elusive grand bargain that would have trimmed projected federal budget deficits with a combination of cuts to Social Security, Medicare and Medicaid in exchange for Republicans going along with measures to increase tax revenues. Numbers as high as $800 billion in new tax revenues and $450 billion in cuts to social programs over 10 years were once bandied about in grand bargaining. Ultimately a deal couldn't be reached because of Republican opposition to any increase in taxes, and Democrat uneasiness with social program cuts.
Passing even this more modest deal will not be easy, especially in the Republican controlled House. Given the opposition of conservative Republicans and outside conservative groups, including the Tea Party Patriots and Heritage Action, it is likely that the only way the deal can be approved in the House is with overwhelming support from House Democrats. The expectation is that House Democrats will hold together to pass the bill with enough Republican yeah votes to garner a majority, and it will pass in the Democrat controlled Senate.