By Janet Hook, WSJ
Congressional Negotiators Avert January Shutdown and Soften Sequester Cuts; Airline Fees to Climb
House and Senate negotiators, in a rare bipartisan act, announced a budget agreement Tuesday designed to avert another economy-rattling government shutdown and to bring a dose of stability to Congress’s fiscal policy-making over the next two years.
Sen. Patty Murray (D., Wash.) and Rep. Paul Ryan (R., Wis.), who struck the deal after weeks of private talks, said it would allow more spending for domestic and defense programs in the near term, while adopting deficit-reduction measures over a decade to offset the costs.
Revenues to fund the higher spending would come from changes to federal employee and military pension programs, and higher fees for airline passengers, among other sources. An extension of long-term jobless benefits, sought by Democrats, wasn’t included.
The plan is modest in scope, compared with past budget deals and to once-grand ambitions in Congress to craft a “grand bargain” to restructure the tax code and federal entitlement programs. But in a year and an institution characterized by gridlock and partisanship, lawmakers were relieved they could reach even a minimal agreement.
“In divided government, you don’t always get what you want,” said Mr. Ryan in announcing the deal.
Ms. Murray joined him in welcoming the prospect that lawmakers would steer away from a crisis-driven budget process. “We have lurched from crisis to crisis, from one cliff to the next,” she said. “That uncertainty was devastating to our fragile economic recovery.”
The deal, which goes to the House and Senate for approval in the coming days, marks a major change in the landmark 2011 budget-cutting law, which set in motion 10 years of fiscal austerity, including across-the-board spending cuts known as sequestration.
The annual discretionary spending target will be raised to $1.012 trillion in 2014 and $1.014 trillion in 2015 under the accord.
The deal responds to the fears of most Democrats and some Republicans that government spending would be cut too much and too randomly under the next round of the sequester, which was slated to reduce the budget for most domestic and defense programs to $967 billion in 2014, down from $986 billion in 2013.
The Murray-Ryan deal will likely need considerable Democratic support to pass the GOP-controlled House. Many Republicans, as well as a large number of conservative activists off Capitol Hill, argue that the sequester cuts have brought fiscal austerity to the federal budget and that they should not be eased.
The final stages of talks Tuesday focused mostly on easing proposed cuts in federal employees’ pensions—a bid to shore up support among House Democrats who otherwise might join with conservative Republicans to sink the bill.
The depth of conservative opposition will become apparent as lawmakers absorb the details, which were released to the public Tuesday night. To draw support from the GOP’s fiscal conservatives, the deal includes additional deficit-reduction measures: While the agreement calls for a $63 billion increase in spending in 2014 and 2015, it is coupled with $85 billion in deficit reductions over the next 10 years, for a net deficit reduction of $22.5 billion.
The deal achieves some of those savings by extending an element of the 2011 budget law that was due to expire in 2021. The sequester currently cuts 2% from Medicare payments to health-care providers from 2013 through 2021. The new deal extends those cuts to 2022 and 2023.
The hard-won compromise was forged by a political odd couple: Ms. Murray, a stalwart liberal and ally of Democratic leaders, and Mr. Ryan, a conservative who was his party’s vice-presidential nominee in 2012. Both were previously better known for their skill at presenting their parties’ messages than for their skill in negotiating bipartisan compromises on major budget issues.
“We cheer for a different football team. We catch different fish,” said Ms. Murray. “We have some differences on policy, but we agree that our country needs some certainty and we need to show that we can work together.”
Unaddressed was the question of whether Congress would renew expanded unemployment benefits for the long-term unemployed, which expire before the year’s end. The White House has said that 1.3 million Americans will lose their emergency unemployment benefits if Congress doesn’t renew the program.
Officials said that Democratic leaders were still looking for ways to extend the program—possibly for three months. Many Republicans are opposed to renewal, saying the program was meant as a temporary response to the recession.
To offset the higher spending, the deal includes an increase in fees charged to airline passengers, higher premiums that employers pay to guarantee pensions through the Pension Benefit Guaranty Corp., and cuts in benefit increases for military retirees. It also includes a requirement that new federal employees pay larger contributions to their pension plans.
The federal pension changes were the focus of the final round of behind-the-scenes negotiations. Rep. Chris Van Hollen (D., Md.) and other Democrats worked to reduce those changes, which were strongly opposed by labor unions and congressional leaders who represent large numbers of federal workers.
There was considerable pressure to scale back the federal pension changes to ensure Democratic support for the agreement. Democrats will be crucial to passing the agreement in the House, because many conservative Republicans are expected to reject it, arguing that annual across-the-board spending cuts, known as sequestration, have brought discipline to the federal budget and shouldn’t be eased.
“We’ll have to carry the vote in the House,” said Rep. Louise Slaughter (D., N.Y.).
Several conservative groups and activists—including Heritage Action and Americans for Prosperity—announced their opposition to the deal even before it was unveiled, arguing that it would erode the spending constraints of sequestration.
More than 20 conservative leaders signed a statement released Tuesday opposing any deal that raises spending levels or increases revenue. They included the leaders of the Family Research Council, the Tea Party Patriots, the tea party-aligned FreedomWorks and the American Conservative Union.
It remains to be seen how far that sentiment will spread among House Republicans, who will meet behind closed doors Wednesday morning to discuss the proposal.
“We’re going to have a healthy discussion,” said Rep. Steve Scalise (R., La.), chairman of the conservative Republican Study Committee.
Still, he said he welcomed the prospect of a two-year budget deal that would bring more stability to the congressional budget process after years of Congress lurching from one crisis-driven deadline to the next. “We’ve been pushing for certainty in our economy,” he said.
Some prominent Republicans are already signaling likely opposition to the deal.
Sen. Marco Rubio (R., Fla.) immediately issued a statement of opposition, saying the deal didn’t do enough to cut the national debt or lift the economy.
“We need a government with less debt and an economy with more good-paying jobs, and this budget fails to accomplish both goals,” he said. “In the short run, this budget also cancels earlier spending reductions, instead of making some tough decisions about how to tackle our long-term fiscal challenges caused by runaway Washington spending.”
Senate Republican Leader Mitch McConnell (R., Ky.) declined to comment on the deal in advance of its announcement, but he has spoken consistently against any plan that allows federal spending to increase beyond caps set in the Budget Control Act.
Senate Democrats seemed more inclined to embrace the emerging deal, based on their briefing with Ms. Murray.
Sen. Mark Begich (D., Alaska) said, “I’m feeling more comfortable” with the shape of the deal, which is expected to ease spending limits equally on defense and domestic spending. Mr. Begich, a member of the Senate Appropriations Committee, was particularly glad to learn the deal would cover two years—a refreshingly long time horizon after years of having budget decisions made in short term, crisis-driven bursts.
Democrats’ complaints have centered on proposals to change federal-employee retirement programs. House Republicans had proposed $132 billion in lower spending over 10 years; President Barack Obama’s budget included $20 billion.
The final deal called for $6 billion in lower spending on federal employees’ pensions. In addition, the deal called for another $6 billion in savings in military retirees’ benefits.
This article originally appeared on the WSJ