Line Items: Deal with It Edition

Dec 11, 2013

We Have a Deal – Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) announced a budget deal late Tuesday after weeks of negotiation and a few days ahead of the December 13 deadline for their conference committee to report an agreement. The deal sets topline spending numbers for the next two years, $1.012 trillion for fiscal year 2014 and $1.014 trillion for fiscal year 2015. These levels are $45 billion above the sequester level for FY 2014 and $18 billion higher for FY 2015. The extra spending will be offset by spending cuts elsewhere and new non-tax revenue over ten years. Because the offsets exceed the spending increases, the deal will reduce the deficit slightly over the next decade and beyond. Ahead of the deal, we looked at what possibly could be included, some of which was in the deal. Shortly before the deal was announced, a bipartisan group of House members sent a letter to Ryan and Murray urging them “to find commonsense, bipartisan solutions to the serious fiscal challenges we face as a nation.” Ryan and Murray made it clear that this wasn’t the deal they each wanted and it does not address the long-term budget issues that must be contended with, but it represents a compromise that moves in the right direction.  

Doesn’t Deal with the Long Term – The agreement does little to address the long-term fiscal challenges facing the country, but it does provide some much-needed stability for the federal budget process and hopefully can set the stage for more substantive bipartisan deals. As Fiscal Commission co-chairs Erskine Bowles and Alan Simpson put it, “The agreement is but a small step forward in restoring some sanity and order to the budget process, and puts in place a slightly more rational fiscal policy by replacing a portion of the inane across the board cuts in discretionary spending from sequestration with smarter, permanent cuts in mandatory programs.” The Campaign to Fix the Debt echoed that sentiment saying, “it is preferable to another round of punts, gimmicks, and showdowns. Lawmakers should pass this legislation with the understanding that it is a step forward not a victory.” Read our summary of the deal and a brief explaining it here.    

Still a Good Deal of Work to Be Done – The budget deal still has to be approved by Congress. The House plans to vote on it on Thursday just before it adjourns for the rest of the year on Friday. The Senate is expected to take it up next week before it adjourns. Leaders in both chambers feel confident that the agreement will be approved by bipartisan majorities. Appropriators will then craft spending bills for the rest of this fiscal year based on the topline budget number. Appropriations legislation is expected to be considered the week of January 6 when lawmakers return from the holiday recess and just ahead of the January 15 expiration of the continuing resolution currently funding the government. Passing spending bills, as opposed to relying on the stopgap measures that have been used in recent years, will provide more guidance to federal agencies on how to proceed.

Will Unemployment Benefits Be Dealt In? – Legislation extending the period the unemployed can collect jobless benefits from 26 to 73 weeks expires on December 28. Some legislators are working to extend the expanded benefits for another year. An extension, which would cost $25 billion, was left out of the budget deal. We argue that any extension of unemployment benefits, just like any other extensions, should be paid for.  

Permanent Doc Fix Even More of a Deal – Earlier this year, the Congressional Budget Office (CBO) significantly reduced its estimate of permanently replacing the Sustainable Growth Rate (SGR) -- known as the “doc fix” -- because of slowing growth in health care costs. That news spurred efforts to enact a permanent fix this year, as opposed to the annual patches preventing a steep reduction in payments to Medicare physicians. Now the estimate has been lowered even further, to $116.5 billion over ten years. While lawmakers are close to a deal on a permanent fix, agreement has still not been reached on offsetting the cost. With time running out to complete an agreement by the January 1 deadline for avoiding a 24 percent cut in physician payments, a three-month fix will be considered in the House to buy negotiators a little more time.  

Hopes for Farm Bill in 2013 Dealt a Blow – Another major bill that is close but won’t be finished this year is the farm bill. Again, the House may vote for a short extension to buy some time, in this case through the end of January. A farm bill agreement could include significant deficit savings.

Key Upcoming Dates (all times are ET)

December 12, 2013

  • Senate Finance Committee executive session to consider legislation to repeal the Sustainable Growth Rate (SGR) - "doc fix" - at 10 am.

December 13, 2013

  • Target adjournment date for the House.

December 20, 2013

  • Target adjournment date for the Senate.

January 1, 2014

  • The "doc fix," temporary tax extenders, extended unemployment insurance benefits, and the farm bill expire.

January 15, 2014

  • The continuing resolution funding the federal government expires.
  • 2014 sequester cuts take effect.
  • First set of IPAB recommendations expected.

February 7, 2014

  • The extension of the statutory debt ceiling expires.

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