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POLITICS: PennAve

Expectations drop for congressional budget deal

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Politics,Congress,Susan Ferrechio,2014 Elections,PennAve,Budgets and Deficits,Government Shutdown,Spending,Chris Van Hollen

Just a week away from its Dec. 13 deadline, lawmakers will have little time in their post-Thanksgiving legislative session to negotiate the kind of major budget deal they'd need to end the federal government's crisis-driven management style.

So rather than struggling to find a "grand bargain" that would offer compromises on spending, taxes and entitlements, lawmakers are now aiming for a narrow deal that would restore some of the cuts imposed under the budget-squeezing "sequester."

"It's looking like a much smaller deal that would hopefully give us a number we could appropriate for fiscal year 2014 … and hopefully a target number for 2015," Rep. Tom Cole, R-Texas, a member of the bipartisan House-Senate budget conference committee, told the Washington Examiner.

The special budget panel was created in October as part of the deal that provided temporary funding to end a 16-day government shutdown.

Expectations for the committee were high, at first.

Amid the shutdown, Republicans had been pressuring Senate Democrats to come to the negotiating table to discuss issues that have kept them hopping from crisis to crisis — reforming the nation's cumbersome tax code, reducing runaway spending and perhaps even finding ways to cut Social Security and Medicare expenses.

But with limited time and a wide gulf between the two parties over how to approach taxes and spending, the 29 budget negotiators quickly decided against even attempting a comprehensive agreement that would resolve all those divisive issues. Instead, the negotiators are focusing on the automatic, across-the-board budget cuts imposed by the sequester. Republicans want to alter the cuts to shelter the Pentagon from the most severe reductions. Democrats want to eliminate the cuts and replace the savings with new revenues, likely a tax increase.

"Right now, we are trying to narrow the scope of the conversation," Rep. Chris Van Hollen, D-Md., the top Democratic negotiator, told the Examiner. "So, we are focused on trying to replace the sequester, at least for a couple of years."

The sequester cuts would reduce spending by about $109 billion next year, lowering overall spending to an annual $967 billion.

That top-line number is far too low for Democrats, who fear cuts to important federal programs. And while some fiscally conservative Republicans support the reductions, many others do not, particularly GOP lawmakers who serve on the House and Senate Armed Services committees. They say the military has become dangerously underfunded because of the sequester cuts.

The dissatisfaction has created an unusual coalition of Democrats and Republicans that supports altering or eliminating the sequester cuts, providing an opening for a final spending compromise.

But Congress can't simply restore the sequester funding cuts.

The sequester was imposed under the 2011 Budget Control Act, which was intended to force the government to cut spending to reduce the nation's debt and budget deficits. Because it's the law, Congress can't just alter it unless lawmakers find the money to replace those savings.

The law mandates nearly $1 trillion in cuts across the entire government, much of it from the Pentagon. Entitlement programs like Medicare, Medicaid and Social Security are exempt from the cuts.

Van Hollen said options include replacing the sequester cuts with a combination of new governmental fees and new tax increases that would come through the closure of so-called tax loopholes.

Rep. Jim Clyburn, D-S.C., a top House Democratic leader on the budget panel, wants the money to be drawn from the Overseas Contingency Operation, the account that has been funding the wars in Iraq and Afghanistan.

While the two sides want sequester changes, they have yet to agree how they should do it.

Most Republicans dislike Van Hollen's tax increase proposal, and say they can't tap the war account as Clyburn suggested because the money is needed to fund the troop withdrawal from Afghanistan.

Democrats, meanwhile, are resisting any changes to entitlement programs to replace the sequester cuts, as the negotiating committee's top Republican, Rep. Paul Ryan, R-Wis., proposed.

"Each side is going to have red lines," Cole told the Examiner. "We are not likely to see some tax rate increase on our side, and they are not likely to accept the Ryan plan on Medicare or Medicaid, so you are down to relatively small things."

This story was first published on Nov. 29 at 8:35 a.m.

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Susan Ferrechio

Chief Congressional Correspondent
The Washington Examiner