Boehner Budget Deal (Oct. 27)

Mike & Co. — 

A bombshell of a budget agreement between the White House and Congressional leadership was announced last night that would raise the debt limit through March 2017 and remove cuts mandated under the Sequester through September 2017.  In fact, Sequester spending would increase by $80 billion over FY 2016 and 2017 — effectively resolving these two issues until well after next year’s elections.  

The timing of the announcement, just days before the transition in the House speakership, is no accident.   Although the terms are favorable to the Democrats on balance, resolving these issues gives presumably incoming Speaker Ryan a free pass on two major issues that have been making the House almost ungovernable before Boehner steps down on Friday

Though floor debates and contentious votes lie ahead, the agreement is likely to be enacted by the end of the week.  

Policy details below…

Best,

Dana

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In the weeks since Speaker Boehner abruptly announced his retirement from Congress, budget negotiations were quietly conducted mostly at the staff level, involving senior aides to Boehner, Mitch McConnell, Nancy Pelosi, Harry Reid, and White House staff members.  

While the four Congressional leaders and President Obama never met face-to-face  there were frequent phone calls among the individual leaders as talks developed.  The approaching deadline on increasing the debt limit and Boehner’s self-imposed deadline lent additional urgency to the talks as it became clear that negotiations could prove far more difficult once a new speaker was in place.

After weeks of discussions, the negotiators filed a wide-ranging budget deal last night that would, among many other things, increase discretionary spending, raise the debt limit, delay the insolvency of the Social Security Disability Insurance trust fund, and prevent a spike in Medicare premiums. 

FY 2016 and 17 discretionary spending caps would be raised by $50 billion and $30 billion respectively, split evenly between defense and non-defense.  Defense would get an additional $16 billion per year of Overseas Contingency Operations funding above the $58 billion proposed by Obama.  Pay fors are likely to include a selloff of crude oil from the Strategic Petroleum Reserve, FCC spectrum auction receipts, the health savings, increased premiums for the Pension Benefit Guarantee Corporation (PBGC), asset sales, and other provisions.

The agreement also provides a freeze in Medicare premiums for 2016 for all beneficiaries, offset by slightly higher premiums in future years; and it includes modest reforms of the SSDI program to accompany a payroll tax reallocation extending solvency of the DI trust fund until 2022. 

Most significantly, the proposal — which runs almost 150 pages, would effectively eliminate about 90 percent of the sequestration budget cuts for non-defense discretionary programs in FY 2016, and about 60 percent of them in FY 2017, while also easing sequestration for defense by equal dollar amounts in both years and thereby providing more substantial relief from sequestration than the Murray-Ryan deal provided for 2014 and 2015. 

It would also reduce, if not eliminate, the potential for government shutdowns this year and next essentially eliminating the risk of a shutdown over funding levels, though retaining the possibility of one over riders and other policy differences. 

Nevertheless, non-defense discretionary funding under the deal would still be low in historical terms.  Even with the sequestration relief provided, such funding for 2016 would be 12 percent below the 2010 level, adjusted for inflation.  By 2017, that spending would fall to its lowest level on record as a share of the economy, with data back to 1962.

The deal is a major, multi-faceted package that addresses a number of contentious issues.  Policymakers and analysts can and will debate various provisions but, overall, the deal is a significant achievement that includes an array of sound policies and policy reforms and accomplishes important goals.  The deal also shows that the policy process can yield productive results even at a time of bitter partisanship.  

Still, the spending increases leave the pillars of the Murray-Ryan spending caps known as the Sequester battered if not busted down.  

Votes on the agreement are expected in the House tomorrow and in the Senate on Friday.  

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