It's budget time again: Lawmakers from the House and Senate are trying to nail down an agreement to keep the government funded before they leave for the holidays on Dec. 13. And, while nothing's final just yet, a deal to avert another shutdown may be in reach.
At the moment, Rep. Paul Ryan and Sen. Patty Murray are discussing a proposal to boost discretionary spending modestly in the next two years, by providing government agencies with partial relief from the automatic sequestration budget cuts.
Under current law, discretionary spending is set to fall from $986 billion this year to $967 billion in 2014. The proposed deal would raise that to somewhere around $1 trillion in 2014. The extra money would be split evenly between defense and non-defense programs.
In exchange, the deal would add other spending cuts further down the road and could raise new revenues by increasing some user fees. The goal is to keep the overall deficit unchanged over the next 10 years.
Here's what we know about the proposal so far:
1. Discretionary spending levels for 2014 would be set at roughly $1 trillion. "Discretionary spending" is basically anything that Congress funds each year through the appropriations process. So it doesn't include Medicare or Social Security. But it does include a lot of other things. The military. The Veterans Administration. Scientific research. Housing programs. Environmental enforcement.
All that federal discretionary spending amounted to $986 billion in 2013. And it's scheduled to drop to $967 billion next year due to the Budget Control Act, with virtually all of the new cuts coming out of defense spending.
House Republicans voted earlier this year to keep next year's spending at that lower level. Senate Democrats wanted to raise discretionary spending back up to $1.058 trillion. The proposal under discussion would aim for roughly halfway between the two positions, at around $1 trillion. Here's one way to put that number in context:
Note that even $1 trillion for discretionary spending next year is lower than the levels envisioned in Paul Ryan's original budget back in 2010. And it's considerably lower than the levels the White House originally wanted.
2) The deal would provide partial relief from sequestration. The budget cuts under sequestration are pretty blunt. They don't give agencies much flexibility to preserve valuable programs and shrink less-valuable ones.
The proposed deal that Ryan and Murray are working on would give agencies a bit more money and more flexibility over the next two years — the proposed deal would restore around $33 billion of the $109 billion in scheduled sequestration cuts for 2014 (chart). That extra money would be split equally between defense and non-defense domestic programs, although the precise details will be left to congressional appropriations.
"We can’t say it will fix every problem caused by sequestration, but it will provide some flexibility," says a senior Democratic aide. "Some of the people who would have been furloughed won't be furloughed. Some of the investments that wouldn't have been made will now be made."
3) The deal would "pay for" that spending through fees and other cuts. Neither side wants to increase the deficit over the next 10 years. So, if they're boosting spending in the short term, they have to pay for it elsewhere. Democrats have said that cuts to entitlement programs like Medicaid or Social Security are off limits, but they're open to other reductions.
One possibility: The two sides are reportedly haggling over whether federal employees should be required contribute more to their own pension funds. President Obama's budget proposed raising this contribution by 1.2 percent, saving $20 billion over the next decade. The House GOP budget would have raised it to 5.5 percent, saving $132 billion.
The two sides are also discussing a hike in various fees in order to raise revenue. Some rumored targets: Revenue from auctioning off broadband spectrum or higher fees on airport security. One hitch? It's not clear if conservatives will accept this as a workaround to their "no-more-taxes" stance. Grover Norquist, for one, has decried "things called user fees that are really taxes.”
4) It's unclear whether aid for the unemployed will be in the deal. Some 1.3 million people will lose their unemployment benefits on Dec. 28 unless Congress extends a jobless aid program that's set to expire (see chart). A one-year extension would cost roughly $25.1 billion. "That definitely remains one of the open items," said the senior aide.
On Thursday, Nancy Pelosi suggested that House Democrats wouldn't accept any budget deal that didn't include a one-year extension of emergency jobless aid. “We are making a very clear statement that we cannot, cannot support a budget agreement that does not include unemployment insurance in the budget or as a sidebar in order to move it all along,” Pelosi said.
Pelosi later softened that stance, however, clarifying that she would need to wait to see the full contours of the final budget agreement before making a decision. If Paul Ryan agrees to a deal that has a fair bit of sequestration relief but doesn't include more jobless aid, then Democrats will have a tough choice to make.
5) Getting the budget agreement through the House could be tricky. Assuming this deal gets finalized, it will still have to get through the House. How hard will that be?
There are plenty of people who would prefer a deal. Many Republicans don't want another government shutdown. And there are quite a few GOP congressional appropriators who are in favor of sequestration relief — particularly those on the armed services committee who are facing a $20 billion cut in defense spending next year under current law. And Democrats, for their part, would be amenable to a deal that boosts funding for domestic programs in the near term. (Any deal along the lines above is unlikely to pass the House without Democratic votes.)
But, as always, landmines abound. On Friday, 18 House conservatives sent a letter to John Boehner demanding only a "clean" continuing resolution bill that would fund the government at the lower $967 billion level next year and keep sequestration in place (albeit with more flexibility for federal agencies). "The Budget Control Act is the law of the land," they wrote. "Our Democrat colleagues are now threatening to shut the government down in order to change that. We should not permit that to happen."
Further reading: Everything you need to know about the sequestration cuts.