Bipartisan Budget Deal Passes, What Does it Mean?

News & Politics

On Wednesday, December 18th the U.S. Senate approved the bipartisan budget deal negotiated by House Budget Committee chairman Paul Ryan and Senate Budget Committee chairwomen Patty Murray. Nine Republican Senators crossed party lines to vote in favor of the budget deal with a final vote tally of 64 in favor and 36 against. Obama is expected to sign the deal soon.

This deal is the culmination of 3 years of budget battles that led to the widely reported government shutdown. Coming in, the Republicans wanted to conserve the Sequester spending cuts that kicked in on March 1, 2013. The Sequester cuts were evenly distributed, half to defense spending, and half to discretionary spending (Spending other than defense, Medicare or Medicaid). The Republicans also wanted no new tax increases or revenues.

Coming into the negotiations, the Democrats wanted to undo the Sequester cuts, reauthoriz the extension of unemployment benefits to 52 weeks after an applicant’s termination date, and they would have liked to undo the recent cuts to the SNAP (Food Stamps) program.

What’s in the deal?

The deal raises discretionary spending levels from $967 billion, which is what it would have been under the Sequester, to $1.012 trillion for 2014 and $1.014 trillion for 2015. We don’t know yet which specific agencies will have their funds restored. The restored funds will be allocated by the congressional appropriations committees.

What are the main points of the deal?

The deal raises airline security fees from $5 to $11.20 starting July 1, 2014. This change is estimated to raise $13 billion over the next 10 years.

It gradually reduces the automatic increase in military retirement benefits for veterans under 62. This is estimated to save $6 billion over the next 10 years.

It also increases by 1.3% the contribution that federal workers, hired after January 1, 2014, will have to make towards their pensions. This is estimated to save $6 billion dollars.

This deal is more of a minor compromise than a comprehensive bill that addresses our major political differences. It doesn’t address a major Republican objective, which is the reformation of so-called entitlements like Medicare and Medicaid. It doesn’t address tax reform or economic stimulus, like infrastructure banks, or investments in renewable energy. It also doesn’t re-extend unemployment benefits. The list of things that this deal doesn’t do is longer than the list of things it does. Essentially the only real thing this deal does is provide much-needed stability to a financial system that has gotten used to rampant volatility over the past 3 years. It’s a good start, but unfortunately it’s not enough.

An analysis of the numbers would contend that this compromise tends to favor the Republicans over the Democrats.

To illustrate this look at this graph:

budget graph

The original Obama budget, at $1.203 trillion, is far further away from the deal passed this week ($1.012 trillion) than the most recent Ryan budget, which clocks in at $967 billion. These numbers show that over the last 3 years, despite losing the 2012 election, Republicans have won the battle over the discussion of the budget. They won the battle over the narrative. The discussion ended up being not about whether we should increase or decrease government spending, but rather how much should we cut it. In the end, the Democrats came down practically $200 billion, while the Republicans met them in the “middle” by going up $50 billion.

For proponents of a government that passes laws, there just might be some good news to come out of this budget deal. In recent days, Speaker of the House John Boehner has shown his growing frustration with the more extreme members and activist groups in his party. He said, “they’re using our members and they’re using the American people for their own goals.” He later stated, “this is ridiculous. Listen, if you are for more deficit reduction, you are for this agreement.” As the only person who is standing in the way of the house passing a bipartisan immigration bill, this development could prove to be, if not the defining moment, perhaps the beginning of more bipartisan lawmaking in Washington.

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