Baby Steps: A Small Compromise on the Federal Budget

Tuesday, December 10, 2013 at 7:20 PM by

Negotiators in Congress announced this afternoon that they have reached a tentative agreement on the parameters of a budget compromise that would make modest reductions in the sequester cuts for fiscal years 2014 and 2015.   The reductions in some of the across-the-board cuts will be more than offset by other cuts, such as reduced funding for retirement benefits of new federal employees, as well as increases in some fees, such as airline ticket fees, thereby slowing growth in the federal deficit.

As others have noted, this definitely isn’t the sort of “grand bargain” that some lawmakers may have hoped for.  In addition, it isn’t certain that the votes will be there to pass this modest compromise.  Some conservative groups are urging Republicans to vote no, and some Democrats are very reluctant to vote for a compromise that doesn’t extend the expiring federal Emergency Unemployment Compensation benefits, which provide assistance for workers who have been unemployed at least six months.        

Although the compromise would reduce the size of some of the across-the-board cuts, total spending would still be below the levels planned before the sequester began taking effect.  The partial relief would be evenly divided between defense and domestic spending, like the sequester itself.   However, it’s the defense cuts that seem to be generating the most lobbying and the most angst in the Capitol, particularly among hawkish federal lawmakers in both parties.

Perhaps the most positive aspects of the compromise are that: 1) it suggests that Congress hasn’t become totally dysfunctional (though let’s see what happens over the next couple of weeks), 2) it gives agencies more discretion in how to allocate cuts, and 3) it may allow lawmakers to turn their attention to some other pressing issues.

On the other hand, I agree with those who find it extremely disappointing that the compromise doesn’t continue Emergency Unemployment Compensation (EUC) benefits, which are scheduled to expire at the end of December.    There’s still a chance, however, that the EUC issue can be addressed later this month or retroactively in January in a must-pass bill, such as the annual legislation to prevent a cut in reimbursement rates for doctors who treat Medicare patients.

It’s also very disappointing that the compromise doesn’t do anything meaningful on the revenue side to address the longer term deficit challenges, or to more permanently resolve the sequestration cuts, rather than just delaying a small portion of them.   

An interesting and thoughtful critique of the un-grand bargain can be found in this NY Times op-ed column by Steven Rattner.    A four-page document summarizing all of the elements of the compromise can be found here.

Jon Peacock 

Categories: Blog, FEDERAL BUDGET & TAXES, federal issues, unemployment benefits | Comments Off on Baby Steps: A Small Compromise on the Federal Budget

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