Budget Deal Easing Spending Cuts Finds Support on Capitol Hill

Published Dec 11, 2013. By Heidi Przybyla .

Congressional negotiators are touting a U.S. budget accord that will ease the long-criticized automatic spending cuts for the next two years, remove the risk of a government shutdown and cut the deficit by $23 billion.

The question now is whether both chambers of Congress will go along with it.

“I’m real disappointed in the deal” because it increases fees and raises costs on pensions, among other steps, Senator Tom Coburn, an Oklahoma Republican, said today on MSNBC’s “Morning Joe” program. “It’s not anything I can support.”

Chief architects Senator Patty Murray and Representative Paul Ryan in announcing the deal said that while imperfect, the plan would provide economic certainty by establishing a bipartisan budget for the first time in four years.

“It is an important step in helping heal some of the wounds here in Congress,” Murray, a Washington Democrat, said yesterday at a Capitol Hill news conference.

The limited agreement seeks to end three years of political gridlock in Congress over spending and revenue that culminated in a 16-day government shutdown in October. Lawmakers’ approval ratings in opinion polls have tumbled amid the regular partisan standoffs over the budget.

“In my view, it will pass,” Representative Tom Cole, an Oklahoma Republican, said today on CNBC.

 

Modest, Achievable

“There’s a lot to be happy with here,” Cole said, citing government stability, the easing of across-the-board cuts and protection for the military. Cole said the package is “modest but achievable and attainable and genuinely bipartisan.”

Already, the deal is drawing criticism from some Republicans, including those backed by the small-government Tea Partymovement, who say it trades concrete spending cuts for future promises. They are poised to resist House Speaker John Boehner’s attempt to win passage for the deal in his chamber later this week.

“What I can see supporting is doing the hard work we were sent up here to do,” Coburn said. Of the deal, he said “two well-meaning individuals hammered out an agreement to get past a political event.”

The bipartisan 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. The agreement sets spending for defense at $520.5 billion and for non-defense at $491.8 billion.

Deficit Reduced

The accord would reduce the budget deficit by $20 billion to $23 billion, the lawmakers said. It would ease the automatic spending cuts known as sequestration by $40 billion in 2014 and about $20 billion in 2015.

The agreement also cushions the military from a $19 billion cut scheduled next month as part of the across-the-board cuts that lawmakers from both sides warned would hollow out the military and cost U.S. jobs.

The agreement, though, falls short of the panel’s original goals. It doesn’t fully replace the automatic cuts and it will have a marginal effect on the U.S. debt because it doesn’t address the growing entitlement programs that are its long-term drivers. It produces a sliver of the $1 trillion to $4 trillion in savings previous budget negotiators sought to identify.

“It’s underwhelming at best,” said Robert Bixby, executive director of the Concord Coalition, which backs deficit reduction. “It leaves a lot undone, and isn’t close to the grand bargain that was sought.”

Tax Breaks

The deal also doesn’t touch the corporate tax breaks Democrats sought to eliminate or raise the U.S. debt limit, setting up another potential fiscal showdown after February. Still, congressional leaders of both parties lauded the compromise as a breakthrough in the divided Congress.

The agreement “will roll back the painful and arbitrary cuts of the sequester and prevent another costly government shutdown,” Senate Majority Leader Harry Reid, a Nevada Democrat, said last night after the deal was announced. “We didn’t get what we wanted. They didn’t get what they wanted. But that’s what legislation is all about.”

President Barack Obama called the accord a “good first step” toward a compromise that will meet some of his goals for spending priorities. “It’s a good sign that Democrats and Republicans in Congress were able to come together and break the cycle of short-sighted, crisis-driven decision-making to get this done.”

Little Changed

Standard & Poor’s 500 Index futures got an early boost in Asia trading on news of the budget accord, then erased those gains and were little changed at 7:39 a.m. New York time Likewise, 10-year Treasuries fell, only to rebound. The dollar snapped earlier declines against some major currencies after the budget announcement.

Yet to be determined is whether the agreement can win enough votes for passage in the Republican-led House, as a number of prominent small-government groups were critical of it.

Still, Republicans charged with pushing the measure through the House, including Majority LeaderEric Cantor who said he’s “pleased” with the deal, voiced support for it.

“This agreement represents a positive step forward by replacing one-time spending cuts with permanent reforms to mandatory spending programs that will produce real, lasting savings,” Cantor of Virginia said in a statement.

Senate Minority Leader Mitch McConnell, a Kentucky Republican who, like a number of Boehner’s rank-and-file, has a primary challenger next year, was silent on the agreement after expressing skepticism earlier in the day.

Rubio Opposition

Some Republicans oppose the deal because it pushes savings into future years and includes a variety of user fees that small-government groups are labeling tax increases.

Senator Marco Rubio, a Florida Republican, said he’ll oppose the agreement. It “cancels earlier spending reductions, instead of making some tough decisions about how to tackle our long-term fiscal challenges caused by runaway Washington spending,” he said in an e-mailed statement.

Representative Tim Huelskamp of Kansas, a Republican, said it “blows up the only real significant spending restraint passed since the Republicans assumed the majority in the 2010 election.”

While Democratic leaders spoke favorably of the deal last night, it doesn’t include an extension of expiring unemployment benefits for 1.3 million Americans that Democrats favor, and that Obama urged lawmakers to pass. That could cost some Democratic votes.

Federal Pensions

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

The agreement includes 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 want to sell the deal to wary rank-and-file by emphasizing that it will reduce thedeficit by an additional $20 billion largely from increased user fees. Those include raising the fees paid by airline passengers, or boosting the so-called Sept. 11 security fee on airline tickets.

The panel’s Dec. 13 deadline was set as part of an agreement ending the government shutdown in October.

Republicans Faulted

Among critics of the deal, Tim Phillips, president of Americans for Prosperity, an Arlington, Virginia-based group that says it backs individual freedom and smaller government, said Republicans are abandoning their limited-spending principles.

“The American people remember hard-won bipartisan spending limits set by the sequester, and are not pleased to see their conservative representatives so easily go back on their word to rein in government overspending,” he said.

Heritage Action for America, a group that tracks lawmaker votes and is affiliated with the Heritage Foundation that backs limited government, said it opposes short-term spending at higher levels in return for future savings.

“A gimmicky, spend-now-cut-later deal will take our nation in the wrong direction,” the group said in a statement.

The final product mollified some Democrats who had earlier said they were concerned about the possible effects on federal employees. Negotiators included pension payment increases for military personnel to mitigate the effects on federal workers.

‘Step Forward’

They also agreed to require that only newly hired federal workers contribute more to their pension plans.

Representative Chris Van Hollen, the top Democrat on the House Budget Committee, said the deal “replaces part of the job-killing sequester” without disproportionately affecting working families including government employees.

“It’s a small, but good step forward for our country,” he said in a statement. Van Hollen’s support for the deal is important, as he will need to help sell it in the House and his Maryland district is home to many federal workers.

Former Senator Alan Simpson, a Republican who was co-chairman of a national deficit-reduction panel in 2010, said the agreement will eventually be enacted after the “bleating of the lambs and the pounding of the chests” by lawmakers, especially in the House.

“If they can’t pass this after working on such a minuscule deal, then pull up your socks and start running,” Simpson said.