Dec. 11, 2013
Senate Budget Chair Patty Murray and her House counterpart Rep. Paul Ryan yesterday reached a deal determining the level of federal discretionary spending for the next two years. In particular, the deal reduces the impact of sequestration, the automatic, across-the-board budget cuts that went into effect in 2013.
Q: Why is this the “$85 billion deal?”
A: This deal totaled $85 billion in changes to projected federal spending. Around $65 billion of that total reduces the impact of sequestration in 2014 and 2015. The remainder is dedicated to reducing budget deficits.
Q: Does this deal close tax loopholes?
No. The Bipartisan Budget Act of 2013 does not tackle tax loopholes, otherwise known as Tax Expenditures. It raises revenue largely from fees (such as air travel fees) and by small tweaks that aim to tackle waste within the budget.
Q: What happens to funding for domestic programs?
A: Domestic discretionary programs – like Head Start, Meals on Wheels, Federal Work Study, and the Women, Infants, Children (WIC) Nutrition Program – will see increased funding relative to fiscal 2013 when sequestration was more fully in effect. Overall, domestic discretionary spending will increase by around $23 billion in fiscal 2014 relative to the previous year. Without a deal, funding for these programs would have stayed roughly constant at 2013 funding levels. It’s important to note, however, that 2013 funding represented a significant cut relative to 2012, due to the impact of sequestration.
Q: What happens to funding for the Pentagon?
A: Absent a deal, the Pentagon would have seen a $20 billion funding reduction in fiscal 2014 relative to 2013. Due to this legislation, military funding will instead rise by about $2 billion in 2014.
Q: I’ve been hearing that federal workers are seeing their pensions cut. Is that true?
A: Federal workers will now be required to make larger contributions to their retirement program. Specifically, federal employees hired after Dec. 31, 2013, will be required to pay an additional 1.3 percent of their salaries into retirement accounts. Additionally, the legislation reduces the cost-of-living adjustment (COLA) for military personnel who retire and draw a pension before age 62. The new COLA will be inflation minus 1 percent, and that change will be phased in gradually over several years.
Q: Did this deal extend unemployment benefits?
A: No. Lawmakers declined to extend federal emergency unemployment compensation (EUC) for the long-term unemployed. That move will leave 1.3 million long-term unemployed Americans without unemployment benefits, unless lawmakers take additional action before the end of the year.
Q: Does this deal make any changes to Medicare?
A: Yes. The deal draws $28 billion in savings from Medicare by extending sequestration’s cuts to that program through 2023; previously, sequestration would have reduced Medicare spending only through 2021. These cuts do not reduce benefits for Medicare beneficiaries, but rather decrease payments to health care providers.
Q: Does it make any changes to Social Security?
Q: Did this deal do anything to the debt ceiling?
A: No. As part of the deal to end the government shutdown back in October, lawmakers suspended the debt ceiling until Feb. 7. This deal did nothing to extend or modify that.
Q: What else is in the deal?
The new legislation increases Transportation Security Administration (TSA) fees levied on airline passengers. It also caps compensation for government contractors at $487,000. And it approves an agreement with Mexico to jointly explore and develop offshore drilling projects.
Q: What happens next?
A: The deal goes to the full House and Senate to be passed into law. Since this deal is a budget resolution – which sets overall spending levels but does not specify funding for every specific federal program – appropriations committees now do the work of writing appropriations bills to finish the budgeting process for fiscal 2014. This work must be completed by Jan. 15, the expiration date of the current Continuing Resolution (CR).
Q: Should I be happy about this deal?
A: The agreement between Sen. Murray and Rep. Ryan is an important step because it represents a move toward bipartisanship and away from manufactured crises. While that’s a good thing, this deal leaves a lot to be desired.
The deal did not contain most of the things that Americans say they want. The deal prevented cuts to military spending, which Americans favor. The deal did not close tax loopholes, which Americans overwhelmingly support. Nor did the deal make an effort to secure the long-term future of Social Security, which is one of Americans’ highest priorities.
This legislation tweaked around the edges of the federal budget instead of crafting real solutions. The most significant achievement is that lawmakers found common ground, however modest in scope.