Budget Deal Heads for Passage by Limiting Scope to Easing Cuts – Businessweek

//Budget Deal Heads for Passage by Limiting Scope to Easing Cuts – Businessweek

Budget Deal Heads for Passage by Limiting Scope to Easing Cuts – Businessweek

A U.S. budget accord is on track to win passage in Congress largely because its most important accomplishment is pushing off automatic spending cuts that neither party likes.

The two-year budget deal sidesteps lawmaker protests by not touching entitlement programs that Democrats want to protect or the corporate tax breaks Republicans favor. It also doesn’t raise the U.S. debt ceiling, setting up a potential fiscal showdown after February.

The accord, which is set for a House vote today, may help lawmakers repair their image after a 16-day government shutdown and the least productive legislative record ever.

“This is better for Congress than it is for the country,” said Stan Collender, managing director of Qorvis Communications LLC in Washington and a former congressional appropriations aide. “It doesn’t do anything about the budget.”

The deal by chief architects Senator Patty Murray and Representative Paul Ryan to ease $ 63 billion in automatic spending cuts — $ 40 billion in 2014 and about $ 20 billion in 2015 — is far from the grand bargain on taxes and spending that previous budget negotiators sought.

The plan would set U.S. spending at about $ 1.01 trillion for this fiscal year, higher than the $ 967 billion required in a 2011 budget plan. It cushions the military from a $ 19 billion cut set for next month.

Bipartisan Support

The deal has the backing of House and Senate Democratic leaders and top House Republicans. President Barack Obama’s administration urged Congress to pass the plan, which he would sign into law, White House spokesman Josh Earnest said yesterday at a briefing.

While the agreement temporarily replaces some of the automatic spending cuts to Pentagon and domestic programs, it’s main objective is political — diffusing the hostility in Congress after three years of spending disputes.

Ryan, a Wisconsin Republican, and Murray, a Washington Democrat, said the deal would provide economic certainty by establishing a bipartisan budget for the first time in four years. It includes $ 23 billion in debt reduction on the nation’s $ 17 trillion national debt.

“Paul Ryan executed what I think is a great deal, not only for our party but for the people back home,” said Representative Pete Sessions, a Texas Republican.

Negotiators considered items that each party wanted and left them out in the end. The plan doesn’t include an extension of expiring unemployment benefits for 1.3 million Americans that Democrats pushed to include, and that Obama urged lawmakers to pass.

Jobless Aid

Representative Chris Van Hollen, the top Democrat on the House Budget Committee, said yesterday he wants to extend the jobless aid as part of the budget agreement in exchange for cutting direct U.S. payments to farmers. Republicans who control the House have opposed continuing the expanded benefits.

The limited agreement seeks to end a cycle of spending standoffs that culminated in the 16-day partial government shutdown in October. It also may give Congress a chance to advance other initiatives that have remained on the back burner as Congress lurched from one stopgap spending bill to the next.

Lawmakers’ approval ratings have tumbled to their lowest levels ever recorded by the Gallup Organization amid the regular budget feuds.

Republicans who oppose the deal say it trades scheduled spending cuts for future promises of austerity that may never materialize and includes tax increases that masquerade as user fees.

‘Recurring Theme’

“There is a recurring theme in Washington budget negotiations,” Senator Rand Paul, a Kentucky Republican, said yesterday. “It’s: ‘I’ll gladly pay you Tuesday for a hamburger today.’ I think it’s a huge mistake to trade sequester cuts now, for the promise of cuts later.”

Congressional leaders are predicting the legislation will pass the House.

“I believe it’ll get a majority of the majority” of House Republicans and a large number of Democratic votes, Representative Darrell Issa, a California Republican, said yesterday after a Capitol Hill briefing.

If the House passes the plan, the Senate will take it up and is expected to clear it for Obama’s signature.

The alternative to passing the budget deal is for Congress to allow the full $ 109 billion in across-the-board spending cuts set for next year to pinch programs including scientific and medical research. The Pentagon has warned that that an additional $ 19 billion in defense cuts slated for January could compromise national security.

Equal Pain

A 2011 budget plan that raised the debt ceiling established the cuts as a hammer — with the threat of equal pain to domestic and defense programs — to force a congressional panel to reach a deal on taxes and entitlement spending. After it failed, Congress allowed the first wave of cuts to primarily affect domestic programs starting last March.

Groups that back limited government and the automatic spending cuts such as Americans for Prosperity and Heritage Action for America criticized the accord as a retreat from policies enacted in a budget deal two years ago.

Club for Growth, which has intervened in Republican primaries to support candidates who support less government spending, said it would rate lawmakers seeking election in 2014 based on their budget votes.

Boehner’s Rebuke

House Speaker John Boehner lashed out at the groups for criticizing the budget deal, in his most pointed public rebuke of a wing of his party that has steered his agenda on fiscal policy since the 2010 election.

“They’re using our members, and they’re using the American people for their own goals, this is ridiculous,” said Boehner, an Ohio Republican. “If you’re for more deficit reduction, you’re for this agreement.”

Former Republican Senator Alan Simpson, who co-chaired a national deficit commission in 2010, said the deal is disappointing because it doesn’t address the nation’s fiscal challenges on entitlement spending and rising health care costs. At the same time, he said, it is heartening that budget leaders from both parties could reach a fiscal agreement.

“It’s baby-step progress,” said Simpson, whose National Commission on Fiscal Responsibility and Reform recommended $ 4 trillion in deficit reduction by 2020. “But at least for the first time in recent memory the two parties are working together.”

Federal Employees

The main components of the deal include raising contributions that federal employees make to their retirement plans and increasing premiums for pensions backed by the Pension Benefit Guaranty Corp.

The final product mollified Democrats who said they were concerned about effects on federal employees. It includes pension payment increases for military workers to mitigate the effects on other federal employees and requires that only newly hired federal workers contribute more to their pension plans.

The agreement has a grab bag of obscure savings provisions, with an emphasis on tightening eligibility criteria and eliminating fraud and overpayments in programs including unemployment insurance, Medicaid and benefits for federal prisoners.

It also eliminates some programs including a 2005 natural gas and petroleum resources research program and caps income paid to federal contractors.

Republican leaders are selling the deal to their members by emphasizing that it will reduce the deficit by an additional $ 20 billion largely from increased user charges. Those include raising the security fees paid by airline passengers.

To contact the reporter on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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