Enter New Budget Deal, Exit Loathsome Sequester
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The Fiscal Times
December 3, 2013

After a year of political warfare over the government shutdown, Obamacare and federal spending, two feisty partisans may be close to cutting a budget deal. 

Seems like Congress has had enough of the across the board spending cuts, widespread employee furloughs and warnings of a hollowed out military. They’re looking to eliminate the sequester and restore some of those cuts at least for the next year or two. 

Related: Murray and Ryan Race the Clock for New Budget Deal

While the agreement being hammered out by  Senate Budget Committee Chairwoman Patty Murray (D-WA) and House Budget Committee chief Paul Ryan (R-WI)  is far from a “Grand Bargain” of tax and entitlement reforms once envisioned by the two parties, it would be enough to placate both parties and avert the possibility of another government shutdown in early January. 

The emerging fiscal 2014 compromise, as outlined  by congressional aides to Bill Hoagland,  a senior official of the Bipartisan Policy Center, would cancel the second year of the automatic cuts and would authorize about $45 billion more in spending for defense and domestic programs  than would have been allowed under the spending caps. 

Overall, the compromise would provide a total of $1.01 trillion of discretionary spending, other than for entitlement programs and interest on the debt, in the coming year.  That little more than $1 trillion would cover $518 billion of Pentagon spending and $494 billion of domestic spending. 

That overall spending level roughly matches the amount sought by Senate Democrats and well exceeds the $967 billion level favored by Ryan and the House Republicans.   

But the Senate apparently failed in its long-shot effort to persuade House Republicans to go along with $1 trillion of additional tax revenue over the coming decade to pay for programs and spending by closing costly federal tax loopholes.

Related: DOD’s Spending Fix? Get Rid of ‘Stars and Stripes 

Instead, the deal will likely include an assortment of increased fees, revenue measures and other savings to offset the $45 billion of additional spending in fiscal 2014. For example, the negotiators are looking at raising $6 billion to $10 billion by having the Federal Communications Commission auction off the rights to electromagnetic spectrum; $5 billion to $10 billion by increasing federal employees contributions to their pension funds; $3 billion to $5 billion by boosting airline passenger fees and other airport-related fees; and up to $10 billion of Medicare savings and elimination of “waste, fraud and abuse.” 

Hoagland, a former Republican Senate Budget Committee staff director, said in an interview Monday that “I have some indications they are going to put together a small-bore package -- nothing big obviously.” 

“I always thought that given that they haven’t  been able to get a budget resolution conference agreement for the last four years that the public pressure is on just to do something that would indicate that both sides could still work together on coming up with an agreement,” Hoagland added. 

Murray and Ryan have been talking privately, on and off, for month, but picked up the pace after lawmakers and the White House agreed to end the government shutdown Oct. 17, The negotiations appear  to be coming to a head this week as the two sides press to craft a new  budget plan to meet a Dec. 13 deadline.  If they fail, the federal government will face a second round of automatic spending cuts and yet another possibility of a shutdown early next year. 

Exhausted by a year of relentless partisan sniping over the budget and debt ceiling that culminated in a 16-day government shutdown in October, Senate Democrats and House Republicans are searching for a minimalist plan that protects their most cherished priorities while still being able to pass muster with both parties.

The sequester was designed to achieve $1.2 trillion of savings over the coming decade absent congressional intervention.  The Budget Control Act of 2011 set annual spending caps and automatically imposed cuts in virtually every agency and program. But with so many complaints from the Pentagon and federal agencies about the hardships being caused by the across the board cuts Congress has been under pressure to do something about it, even if only temporarily.

Related - CBO’s Elmendorf Downplays Need for Big Budget Deal 

Yesterday, aides to Murray and Ryan declined to comment   on the progress of the talks. However, others voiced concern that negotiations between the two sides were once again coming down to the wire.

“There is no question that the budget conference should be moving at a faster pace,” said Rep Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee. “If Congress fails to produce a budget that replaces the job-killing sequester, American families and businesses will be left to pay the price.”   

Maya MacGuineas, president of the Committee for a Responsible Federal Budget,   thinks “there is a decent chance that Murray and Ryan will come up with a modest deal “to offset part of the sequester for the next year or two.” 

“I fear it won’t make much of a dent in the longer-term fiscal issues, but coming up with any type of an agreement will be helpful in getting both sides re-acquainted with working together,” she added. “If they fail to get even a small deal, I fear the country just falls deeper into this pit of dysfunction where Washington’s ability to govern is being seriously called into question.” 

William Galston, a public policy expert at the Brookings Institution and former adviser to President Bill Clinton, agreed that at best the talks will produce a “mini-bargain” with minimal long term impact on federal spending and the deficit. 

“It may turn off some of the sequester for a year or two or three,” he said. “It’s unlikely to revert the sequester for the duration of its legal force” during the next eight years because the two sides can’t agree on ways to offset the “many hundreds of billions of dollars of budget cuts” mandated under the Budget Control Act. 

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Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.