As we head into Fiscal Year 2016, Congress has yet to pass appropriations bills for the full year. A Continuing Resolution approved by Congress and the President will fund the government through December 11, 2015. The possibility of a government shutdown still looms that can be traced back to the inability of Congress to produce a bipartisan package of deficit reduction in 2011 and the imposition of “sequester” cuts for the following decade triggered by that failure.
As we head into Fiscal Year 2016, Congress has yet to pass appropriations bills for the full year. A Continuing Resolution approved by Congress and the President will fund the government through December 11, 2015. The possibility of a government shutdown still looms that can be traced back to the inability of Congress to produce a bipartisan package of deficit reduction in 2011 and the imposition of “sequester” cuts for the following decade triggered by that failure.
Both parties are now unhappy with the current sequester appropriations levels. The President has threatened to veto appropriations bills that spend at the sequester levels, while the Congressional Budget Resolution aims to spend more than sequester levels on total defense spending but lower than sequester levels on non-defense spending.
In 2013, when faced with appropriations levels both parties felt were too low, Congress negotiated a bipartisan agreement to increase appropriations spending for two years — paying for some sequester relief with reductions in mandatory spending and small increases in revenues (mostly through user fees).
That deal — often called the Ryan-Murray agreement after then-chairman of the House Budget Committee Paul Ryan (R-WI) and Senate Budget Committee Chairman Patty Murray (D-WA) — ended with Fiscal Year 2015, leaving FY 2016 as the first Congress has had to both agree on appropriations details AND a top-line spending number.
To date, little progress has been made on either front. The President and Congress have not agreed to a top-line number for Fiscal Year 2016 and no appropriation bills have cleared Congress and been sent to the President.
It is clear that a budget deal similar to Ryan-Murray will be needed to break the impasse. In crafting such a deal, negotiators should heed the warnings we offered after the 2013 deal and reflect on the last two years to increase the chance of a better agreement this time around:
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Compromise will be necessary. This does not necessarily require a “split the difference” result but it does mean that neither the President’s budget nor the Congressional Budget Resolution can prevail. In Ryan-Murray, the defense and non-defense caps were each raised by $31 billion over two years.
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Both parties need to remember that the “sequestration” level is one that neither party ever intended to go into effect. Even after the partial relief from the sequester in 2013, the resulting levels of discretionary spending were still lower than the discretionary caps put in place by the Budget Control Act of 2011 — and lower than the levels under the Simpson-Bowles plan or the original Ryan budget.
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However, current budget projections showing temporarily lowered deficits depend on those sequester levels of spending. Any additional spending on discretionary programs — whether through the appropriations process, through continuing resolutions, or through supplemental defense appropriations — will make deficits larger if the spending is not honestly paid for.
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Honestly paying for sequester relief means looking at other areas of the budget and new revenue. However, one pitfall of the Murray-Ryan deal was that the attempted cuts to specific mandatory spending programs were small and narrowly targeted — most notably the attempt to reduce retiree military pensions. This allowed advocates to rally behind reversing the policy by claiming that they had been unfairly singled out.
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Offsets should put in place policies that will generate savings over time rather than achieve one-off savings simply to hit a 10-year target.
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Since both parties agree current overall discretionary sequester levels are too low, extending the discretionary sequester beyond its expiration date (2021) is not a legitimate offset.
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Extending the sequester on mandatory spending, especially on providers through Medicare, has been allowed to take effect. However, both the Medicare Trustees and the Congressional Budget Office have expressed doubts about the ability to continue such low levels of payments indefinitely and a push for more fundamental reforms to achieve the same levels of savings would be better both for the short term — to avoid providers feeling singled out and lobbying to get just their cuts reversed — and also for the long term, since Medicare growth is one of the fundamental fiscal challenges facing us.
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Ultimately, if any bipartisan budget deal is not followed up with serious attempts at entitlement and tax reform that can reduce projected long-term deficits, the tinkering around the edges itself becomes a budget gimmick because it allows the future sequester levels to remain in place — making the deficit look smaller while allowing Congress to punt on relieving the worsening fiscal strains caused by an aging population, rising health care costs and an inefficient tax code. Fiscal policy was on an unsustainable path before the 2013 deal, remains so now, and will remain so after the next deal.
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Then as now, it is not clear that Capitol Hill leaders or the President have plans to follow up any short-term achievement with anything more. Hopes turn toward the next President’s first budget for substantive change. That is why it is important that this deal not make the future outlook worse by relying on gimmicks or policies that appear to bring money in — but do so only in the short term, and then draining coffers even more in the long term.
Measured against the current CBO baseline, which projects a total deficit of $6.3 trillion through 2023, the agreement is best viewed as a way to rearrange some of the near-term sequestration cuts rather than as a way to change the overall fiscal trajectory.
