House Passes Budget Easing $63 Billion in Spending Cuts

House Passes Budget Easing $63 Billion in Spending Cuts
By Bloomberg Dec 13, 2013 7:27 AM GMT+080

The U.S. House passed the first bipartisan federal budget in four years, which would ease $63 billion in automatic spending cuts and avert another government shutdown. The legislation now heads to the Senate.

The House voted 332-94 today for the $1.01 trillion compromise budget crafted by Senator Patty Murray and Representative Paul Ryan, the chairman of a special bipartisan panel. President Barack Obama said he’ll sign the final measure.

The agreement’s main accomplishments are to ease automatic spending cuts that neither party likes by $40 billion in 2014 and about $20 billion in 2015 and cushion the military from a $19 billion reduction starting next month. The accord doesn’t include changes to taxes or spending on entitlement programs such as Medicare and Social Security.

“It’s progress,” House Speaker John Boehner said in a floor speech before the vote. “It’s doing what the American people expect us to do,” which is to “stick to our principles but find common ground.”

The budget deal replaces about half of the automatic cuts to defense and non-defense discretionary spending in 2014 and 25 percent of the reductions in 2015, which means most of the automatic cuts enacted in 2011 still take effect. It includes $23 billion in deficit reduction.

“This agreement is better than the alternative, but it misses a huge opportunity to do what the American people expect us to do, and that is to put this country on a fiscally sustainable path,” said Representative Steny Hoyer of Maryland, the second-ranking House Democrat.

Doctors Spared

The accord also spared doctors for three months from cuts in the Medicare payment rates set to start in January. The measure doesn’t extend emergency benefits for 1.3 million unemployed workers, an omission that frustrated Democrats, who say they plan to continue the fight when Congress returns in January from a holiday break.

The deal won bipartisan support because it doesn’t touch entitlement programs Democrats have pledged to protect or the corporate tax breaks Republicans favor.

It also doesn’t raise the U.S. debt ceiling, setting up a potential fiscal showdown after borrowing authority lapses as soon as February.

Lawmakers and some economists said adopting a formal budget will provide some certainty to the U.S. economy after three years of spending feuds that led to a government shutdown, rattled investors and prompted a downgrade in the nation’s credit rating.

Beth Ann Bovino, chief U.S. economist for Standard & Poor’s Corp., said in a recent newsletter that adoption of a bipartisan budget will be a boon to the U.S. economy.

Uncertainty Reduced

“The budget would reduce a key risk, political uncertainty,” she wrote. “The private sector will probably be more confident when planning investment and spending for next year, which would directly boost growth.”

The deal is far from the $1 trillion to $4 trillion grand bargain on taxes and spending that previous budget negotiators sought. The plan would set U.S. spending at about $1.01 trillion for this fiscal year, higher than the $967 billion required in a 2011 budget plan.

Much of the deficit reduction will come in later years, according to an analysis by the nonpartisan Congressional Budget Office. The plan would lower the deficit by $3.1 billion in 2014 and $3.4 billion in 2015 and exceed $20 billion a year in 2022 and 2023, the CBO said.

Medicare Payments

A big portion of the savings is tied to extending the cuts in Medicare provider payments into 2022 and 2023, rather than letting them expire in 2021 as under current law.

The accord may help lawmakers repair their image after a 16-day government shutdown in October that caused congressional approval ratings to fall to the lowest level recorded by the Gallup Organization polling group.

It also may give lawmakers breathing room to debate other initiatives, including gun control and raising the minimum wage, which have been sidelined as Congress lurched from one stopgap spending bill and fiscal crisis to the next.

A group of Republicans opposed to the deal say it trades scheduled spending cuts for future promises of austerity that may never materialize and includes tax increases that masquerade as user fees.

Heritage Action for America, a group affiliated with the Heritage Foundation that backs limited government, said it will include the budget vote in its scorecard ranking the records of members when they seek re-election.

‘Step Backwards’

“By increasing spending, increasing fees and offering up another round of promises waiting to be broken, the deal represents a step backwards,” the group said in a statement yesterday.

Whether this show of bipartisanship could lead to cooperation on a broader tax-and-spending agreement or is a limited compromise of convenience remained unclear.

“I think it’s neither,” House Minority Leader Nancy Pelosi said at a news conference before the vote. “I don’t think it’s a one-off, and I don’t think it’s a great turning point, but I think that we have many more areas that we can work together in a bipartisan way.”

A 2011 budget plan that raised the debt ceiling established the cuts as a hammer -- with the threat of equal pain to domestic and defense programs -- to force congressional negotiators to reach a deal on taxes and entitlement spending. After they failed, Congress allowed the first wave of cuts to primarily affect domestic programs starting last March.

Pentagon Cuts

The alternative to a bipartisan deal was for Congress to let $109 billion in scheduled across-the-board spending cuts pinch programs, including scientific and medical research.

The Pentagon had warned that that an additional $19 billion in cuts starting in January could compromise national security.

There are signs that lawmakers remain frustrated by divides. Boehner, an Ohio Republican, lashed out at some groups that typically ally with Republicans for criticizing the deal and urging lawmakers to vote against it.

“They are misleading their followers,” Boehner said today at a Capitol Hill news conference. “I think they are pushing our members in places they don’t want to be. And frankly, I just think they’ve lost all credibility.”

The main components of the deal include raising contributions that new federal employees make to their retirement plans and increasing premiums for pensions backed by the Pension Benefit Guaranty Corp.

One of the largest areas of savings in the next 10 years comes from an increase in aviation security fees, which would reduce the deficit by more than $12 billion.

The deal includes reduced cost-of-living increases for working-age military retirees.

The budget plan also tightens eligibility criteria for and overpayments in programs including unemployment insurance, Medicaid and benefits for federal prisoners.

It eliminates a 2005 natural gas and petroleum resources research program and caps income paid to federal contractors.

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