Budget Breakthrough?

Forgoing formal conference negotiations, in recent weeks the leaders of the Budget Conference Committee – Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) – have taken it upon themselves to forge a limited budget agreement and appear to be close to a deal that would increase FY 2014 and FY 2015 discretionary spending caps to slightly over $1 trillion and include a deficit reduction package at a level still under negotiation, but reported to be in the vicinity of $85 billion (meaning the package as a whole may produce net budget savings).

The funding increases would likely be split evenly between defense and non-defense programs, with each seeing a $20 billion increase in FY 2014 and $12.5 billion in FY 2015, mitigating sequestration for two years. With tax increases and cuts to Medicare, Medicaid, and Social Security off the table, options being considered for deficit reduction include user fees such as aviation fees, wireless spectrum auction, and changes to federal employee retirement plans.

Both Rep. Ryan and Sen. Murray are quick to point out that they do not have a final deal. Likewise, the process gets far more complicated once it goes beyond the two budget leaders. Until the details are released, the base reaction remains uncertain. However, some conservative Republicans are already balking at the higher spending level and Democrats – especially Democratic leaders with constituents in the DC metro area – will be unhappy with impacts to federal retirement plans. Democrats would also like to see an extension of expiring unemployment benefits included in the bill, though that appears to be a non-starter with Republicans.

The House is scheduled to adjourn for the year on Friday, which is also the Committee’s aspirational deadline to produce an agreement. In order to adhere to the House three-day requirement for a bill to be published before it is brought for a vote, legislation must be introduced on Tuesday. However, December 13 is a non-binding deadline; the real deadline for action is the expiration of the current FY 2014 Continuing Resolution (P.L. 113-46) on January 15.

For now, optimism prevails that the political impasse over budget issues may have reached a breaking point. Appropriators are poised, if not eager, to pull together an FY 2014 omnibus appropriations bill based on a high discretionary spending cap that enables them to implement policy and program changes in regular order.