President Obama praised the legislation for unwinding some of the "damaging sequester cuts that have harmed students and seniors and acted as headwinds our businesses had to fight."
Under the Budget Control Act, which resolved the last "fiscal cliff" episode, discretionary spending would have been capped at $967 billion next year. Under the next agreement, that level is instead set at $1.012 trillion (splitting the difference between the top line spending figures proposed in the House and Senate's respective budget resolutions). The deal includes $63 billion in relief from sequestration, split evenly between defense and non-defense programs, setting non-defense spending fro FY 2014 at $491.8 billion (a roughly $22 billion increase over this year's cap of $469.3 billion). The deal also extends a 2% sequestration cut to Medicare, which should alleviate cuts to other non-defense programs.
Part of what will make this deal palatable to conservatives in Congress is that it achieves deficit reduction without raising taxes. It does so by imposing fees on airlines passengers, increasing the retirement contributions of newly hired federal workers beginning on January 1, 2014, reducing the cost of living adjustments for military retirees between the ages of 40 and 62, and extending Medicare provider sequestration for two years beyond that currently scheduled by the Budget Control Act.
In the President's official statement, he called the agreement a "good first step away from the crisis-driven decision-making that has only served to act as a drag on our economy," but cautioned that there is much more work to do. Now that Congress has agreed on the top line spending figures for the next two years, the next challenge is actually funding the government. What looks most likely for the remainder of Fiscal Year 2014 is an Omnibus Appropriations bill that addresses all spending programs that would otherwise be covered by the 12 stand-alone Appropriations subcommittees. Given the highly contentious nature of some of the issues that fall under the purview of the Labor, Health and Human Services Appropriations Subcommittee (including the Affordable Care Act - "Obamacare"), it appears unlikely that there will be a traditional comprehensive Labor-HHS-Education appropriations bill. Instead, there could be some Labor-HHS anomalies and a "freeze" for most accounts. This arrangement could well result in increased funding for some programs, but will be unlike the appropriations process for other categories.
Although the Bipartisan Budget Agreement has been hailed as a compromise that will allow lawmakers to finally stop governing by crisis for at least two years, there remain two hurdles to clear before this praise becomes entirely warranted:
- The Continuing Resolution that reopened the government back in October is set to expire on January 15. This means that the appropriations legislation, in whatever form it takes, must be passed by then in order to avoid another government shutdown;
- The temporary suspension of the statutory debt limit expires on February 7. This means, depending on which economic projection you look at, Congress will have to vote to raise the debt ceiling again some time between between March and June or risk the United States defaulting on its debt.
There have been reports that Appropriations Committee staffers have been working through the holiday recess in order to have legislation ready for consideration when lawmakers return to Washington.
Hopefully, with the appropriations hurdle cleared by mid-January, Congress will be able to turns its attention to the debt ceiling and finally, truly, be able to stop governing by crisis.
