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Budget Deal in U.S. Would Reduce Automatic Spending Cuts

December 09, 2013

Budget Accord in U.S. Would Reduce Automatic Spending Curbs

Budget-conference committee chairs Rep. Paul Ryan, R-Wisc., and Sen. Patty Murray, D-Wash., listen as Congressional Budget Office Director Doug Elmendorf testifies to the committee on Nov. 13, 2013. Photographer: Bill Clark/CQ Roll Call via Getty Images

U.S. budget negotiators are nearing a deal to trim automatic spending cuts that might break a three-year cycle of failed fiscal talks in Washington.

Reaching agreement is only the first step. Rounding up enough votes to pass in Congress will be the real challenge.

The deal being crafted doesn’t slow the growth of the national debt and doesn’t rein in the corporate tax breaks Democrats targeted for elimination. The accord also wouldn’t fully replace the spending cuts known as sequestration.

Aides to Democratic Senator Patty Murray and Republican Representative Paul Ryan, chief negotiators on a special panel, say they are optimistic for a compromise by a Dec. 13 deadline to ease $100 billion to $200 billion in cuts for a year or two.

Negotiations are “making progress, moving in the right direction,” Richard Durbin, the No. 2 Senate Democrat, said on ABC’s “This Week” yesterday. “They haven’t closed a deal.”

If an accord eludes Ryan and Murray, House Speaker John Boehner is poised to step in.

Boehner and other Republicans don’t want to risk another government shutdown, or get blamed for it, so he’s prepared to go ahead this week with a stopgap spending plan that keeps funding at current levels -- Pentagon cuts and all.

That lower level of funding would be just fine for many Republicans when current funding runs out Jan. 15.

Unemployment Aid

“The key is we not have another government shutdown, that we do keep the spending caps in place, that we don’t raise taxes at a time when the economy is still weak,” Senator Rob Portman, the Ohio Republican and member of the special panel, said yesterday on ABC’s “This Week” broadcast.

Democrats including Maryland’s Steny Hoyer, the No. 2 House Democrat, are demanding that Republicans agree to renew expiring unemployment insurance benefits for 1.3 million Americans, either in a deal or in tandem with an accord.

Senator Sherrod Brown of Ohio and 31 Democrats today in a letter urged support for a bill that would extend the expanded benefits, saying the assistance is “a lifeline to millions of Americans as they search for work in this challenging economy.”

Durbin said yesterday that negotiators aren’t yet ready to say “take it or leave it” to Republicans on the aid extension.

Lawmakers set up the 29-member budget conference panel as part of the agreement that ended the 16-day government shutdown in October, and set a Dec. 13 deadline to complete its work.

Cuts Supported

A letter signed by 30 lawmakers including Representative Mick Mulvaney, a South Carolina Republican, to be sent to House leaders criticizes the negotiators’ emphasis on pushing off cuts to future years, echoing concerns of many Senate Republicans, said an aide close to the discussions who requested anonymity.

Republicans pleased that Congress has cut spending for two years in a row are loathe to undo that progress, the aide said.

In an interview, Mulvaney said Republicans might be willing to delay the scheduled cuts if they were replaced by structural changes in entitlement programs such as Medicare, a step Democrats vow to block as part of a limited deal.

Some of the savings would be used to soften the blow of $19 billion in cuts scheduled to hit the Pentagon in January.

Aides to Ryan, of Wisconsin, and Murray, of Washington, say while they make progress, significant issues remain, including what portion of savings should come from increasing employees’ contributions to their federal pensions, a step many Democrats oppose.

‘Really Nervous’

The emerging compromise faces peril in both parties.

“They are also really nervous about whether they have the votes” to pass it, said Ed Lorenzen, a senior adviser to the Committee for a Responsible Budget, which advocates for fiscal responsibility.

Republicans facing potential conservative challengers in 2014 criticize the proposal because it relies on higher spending in the short term while pushing off into future years cuts they fought hard to secure.

With the leaders of both chambers eager to avoid another shutdown, lawmakers want to vote on a budget or temporary spending bill before the Republican-led House leaves Washington on Dec. 13 for a long holiday break.

Public approval ratings for Republicans, in particular, plummeted amid a series of fiscal showdowns in the past three years.

Short-Term Bill

Majority Leader Eric Cantor, the Virginia Republican who sets the House schedule, listed a budget agreement among bills that “may become available for consideration” this week.

Boehner has a second option: A short-term spending measure that probably would last for three months, according to a leadership aide. The stopgap bill wouldn’t stop the scheduled budget cuts that are to begin Jan. 15.

A spending extension at current levels -- including the January cuts -- would “pass over here, I believe,” said Kansas Republican Tim Huelskamp. He and more than a dozen other Republicans met last week to plot strategy on how to maintain the scheduled spending cuts even with a budget deal.

Appropriators who have resisted a spending deal that could force deep cuts on the military signaled they may be willing to back a short-term deal to avert the threat of another government shutdown.

House Republicans told leaders in a closed meeting last week that they didn’t want to leave Washington without voting on something that would continue government operations past mid-January, according to several members in the room.

Quick Vote

If there is a deal, aides say Murray and Ryan probably will urge the House and Senate to vote directly on their accord, bypassing the panel.

Among the biggest remaining obstacles is a proposal that would boost federal worker pension contributions. Republicans say the step could save $130 billion. President Barack Obama proposed $20 billion in savings, making it hard for Democrats to press for even smaller savings that Obama is backing.

Leading Democrats say they’ll oppose a deal that disproportionately targets federal workers.

“It’s inappropriate, absent a big deal,” Hoyer said in a Dec. 5 news conference, “to further look to the pockets of federal employees at this point in time.”

Congress has already “dipped deeply into their pockets and reduced not only their present benefits and pay, but also their longer-term benefits and pay,” he said.

18 Republicans

Hoyer is among several Maryland Democrats in leadership who would be responsible for rounding up votes.

Also, objections are coming from a group of at least 18 House Republicans who are concerned that negotiators will trade spending cuts set in law for future savings that may not occur. They are drafting a letter to Boehner in support of a spending bill of $967 billion that retains the automatic cuts.

The emerging agreement wouldn’t raise the nation’s borrowing limit, another potential fiscal showdown Congress faces in the first month next year.

The menu of options Murray and Ryan are considering include raising the fees paid by airline passengers, or boosting the co-called Sept. 11 security fee on airline tickets. Budget experts estimate adjusting airline fees could generate as much as $11 billion to offset some automatic cuts.

Another item likely to be part of any deal is auctioning government-owned airwaves. Ryan has previously shared with Republican lawmakers ideas including increased premiums for pension plans backed by the Pension Benefit Guaranty Corp. and a cut in Medicaid payments to hospitals.

It will not touch the major U.S. entitlement programs that are largely responsible for the long-term growth in the nation’s debt, nor will it raise taxes.

“It really is such a small deal,” said Bob Bixby, executive director of the Concord Coalition, a group that’s pushing for lower deficits. “The good to come out of it would be the avoidance of a crisis and a bipartisan budget agreement.”

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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