Budget Deal to Ease Spending Cuts Gets Republican Backing

Dec. 11 (Bloomberg) -- Bloomberg chief Washington correspondent Peter Cook reports on the next step for the budget deal reached by the Congressional budget committee on Bloomberg Television’s “Bloomberg Surveillance.”

Congressional negotiators selling a budget accord won Republican endorsements for the plan to ease automatic U.S. spending cuts for two years, remove the risk of a government shutdown and cut the deficit by $23 billion.

“I believe it’ll get a majority of the majority” of House Republicans and a large number of Democratic votes, Representative Darrell Issa, a California Republican, said today after a Capitol Hill briefing. The House may vote as early as tomorrow on the plan.

Chief architects Senator Patty Murray and Representative Paul Ryan in announcing the deal said that while imperfect, the plan would provide economic certainty by establishing a bipartisan budget for the first time in four years.

“It is an important step in helping heal some of the wounds here in Congress,” Murray, a Washington Democrat, said yesterday at a Capitol Hill news conference.

The limited agreement seeks to end three years of political gridlock in Congress over spending and revenue that culminated in a 16-day government shutdown in October. Lawmakers’ approval ratings in opinion polls have tumbled amid the regular partisan standoffs over the budget.

The deal Murray and Ryan outlined has support of House and Senate Democratic leaders and top House Republicans. President Barack Obama’s administration urged Congress to pass the deal, which he would sign into law, White House spokesman Josh Earnest said at a briefing.

Photographer: Andrew Harrer/Bloomberg

Representative Paul Ryan, a Republican from Wisconsin, left, speaks as Senator Patty Murray, a Democrat from Washington, looks on during a news conference at the U.S. Capitol in Washington, D.C. on Dec. 10, 2013. Close

Representative Paul Ryan, a Republican from Wisconsin, left, speaks as Senator Patty... Read More

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Photographer: Andrew Harrer/Bloomberg

Representative Paul Ryan, a Republican from Wisconsin, left, speaks as Senator Patty Murray, a Democrat from Washington, looks on during a news conference at the U.S. Capitol in Washington, D.C. on Dec. 10, 2013.

Unemployment Aid

The plan doesn’t include an extension of expiring unemployment benefits for 1.3 million Americans that Democrats has pushed to include, and that Obama urged lawmakers to pass.

Chris Van Hollen, the top Democrat on the House Budget Committee, said today he wants to extend the jobless aid as part of the budget agreement in exchange for cutting direct U.S. payments to farmers. Republicans who control the House have opposed continuing the extended benefits.

At the White House, Earnest said that the long-term jobless aid has been treated as “an emergency program,” where costs aren’t recouped from other accounts and instead are added to the deficit. He said the practice began during the administration of Republican President George W. Bush.

“There is no reason they shouldn’t be able to get it done this year,” Earnest said.

While the budget deal will face a challenge in the Republican-led House, even lawmakers who oppose the agreement expect it to pass the Democrat-controlled Senate.

Group Criticism

“I’m not sure that trying to tie it up procedurally really accomplishes much,” said John Thune of South Dakota, the No. 3 Republican leader in the Senate.

Groups that back limited government and the automatic spending cuts such as Americans for Prosperity and Heritage Action for America criticized the accord as a retreat from policies enacted in a budget deal two years ago.

Club for Growth, which has intervened in Republican primaries to support candidates who support less government spending, said it would rate lawmakers seeking election in 2014 based on their budget vote.

House Speaker John Boehner lashed out at the groups for criticizing the budget deal, in his most pointed public rebuke of a wing of his party that’s steered his agenda on fiscal policy since the 2010 election.

“They’re using our members, and they’re using the American people for their own goals, this is ridiculous,” Boehner said. “If you’re for more deficit reduction, you’re for this agreement.”

Optimistic Tone

The tone in the room during the briefing was optimistic, said Buck McKeon, a California Republican and chairman of the House Armed Services Committee. After the meeting, House Republicans Tom Cole of Oklahoma and Matt Salmon of Arizona separately said the budget will pass.

Paul Ryan executed what I think is a great deal, not only for our party but for the people back home,” said Representative Pete Sessions, a Texas Republican.

Republicans, including those backed by the small-government Tea Party movement, say the deal trades spending cuts that are part of sequestration for future promises.

‘Hamburger Today’

“There is a recurring theme in Washington budget negotiations,” Senator Rand Paul, a Kentucky Republican, said. “It’s: I’ll gladly pay you Tuesday for a hamburger today. I think it’s a huge mistake to trade sequester cuts now, for the promise of cuts later.”

The Senate is expected to vote on the accord next week, said Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid.

The bipartisan 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. The agreement sets spending for defense at $520.5 billion and for non-defense at $491.8 billion.

The accord would reduce the budget deficit by $20 billion to $23 billion, the lawmakers said. It would ease the automatic spending cuts known as sequestration by $40 billion in 2014 and about $20 billion in 2015.

The agreement also cushions the military from a $19 billion cut scheduled next month as part of the across-the-board cuts that lawmakers from both sides warned would hollow out the military and cost U.S. jobs.

‘Underwhelming’ Deal

The agreement, though, falls short of the panel’s original goals. It doesn’t fully replace the automatic cuts and it will have a marginal effect on the U.S. debt because it doesn’t address the growing entitlement programs that are its long-term drivers. It produces a sliver of the $1 trillion to $4 trillion in savings previous budget negotiators sought to identify.

“It leaves a lot undone, and isn’t close to the grand bargain that was sought,” said Robert Bixby, executive director of the Concord Coalition, which backs deficit reduction.

The deal also doesn’t touch the corporate tax breaks Democrats sought to eliminate or raise the U.S. debt limit, setting up another potential fiscal showdown after February. Still, congressional leaders of both parties lauded the compromise as a breakthrough in the divided Congress.

The agreement “will roll back the painful and arbitrary cuts of the sequester and prevent another costly government shutdown,” Reid, a Nevada Democrat, said last night.

Stocks Fall

The Standard & Poor’s 500 Index fell for a second day as investors considered whether the deal will prompt the Federal Reserve to pare back its stimulus. The Index fell 1.1 percent to 1,782.09 at 4 p.m. The dollar snapped earlier declines against some major currencies after the budget announcement.

Republicans charged with pushing the measure through the House, including Majority Leader Eric Cantor who said he’s “pleased” with the deal, voiced support for it.

Senate Minority Leader Mitch McConnell, a Kentucky Republican who, like a number of Boehner’s rank-and-file, has a primary challenger next year, has been silent on the agreement after expressing earlier skepticism.

Some Republicans oppose the deal because it pushes savings into future years and includes a variety of user fees that small-government groups are labeling tax increases.

‘Tough Decisions’

Senator Marco Rubio, a Florida Republican, said he’ll oppose the agreement. It “cancels earlier spending reductions, instead of making some tough decisions about how to tackle our long-term fiscal challenges caused by runaway Washington spending,” he said in an e-mailed statement.

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

The agreement has a grab bag of obscure savings provisions, with an emphasis on tightening eligibility criteria and eliminating fraud and overpayments in programs including unemployment insurance, Medicaid and benefits for federal prisoners.

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

User Charges

Republican leaders want to sell the deal to wary rank-and-file by emphasizing that it will reduce the deficit by an additional $20 billion largely from increased user charges. Those include raising the fees paid by airline passengers.

U.S. airlines won repeal of a separate airport security fee, imposed after the 2001 terrorist attacks, that raises about $380 million in fiscal 2012 from the carriers. The budget agreement ends the fee as of Oct. 1 next year.

The final product mollified some Democrats who had earlier said they were concerned about the possible effects on federal employees. Negotiators included pension payment increases for military personnel to mitigate the effects on federal workers.

They also agreed to require that only newly hired federal workers contribute more to their pension plans.

Van Hollen said the deal “replaces part of the job-killing sequester” without disproportionately affecting working families including government employees.

“It’s a small, but good step forward for our country,” he said in a statement.

Former Senator Alan Simpson, a Republican who was co-chairman of a national deficit-reduction panel in 2010, said the agreement will eventually be enacted after the “bleating of the lambs and the pounding of the chests” by lawmakers, especially in the House.

“If they can’t pass this after working on such a minuscule deal, then pull up your socks and start running,” Simpson said.

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net; Derek Wallbank in Washington at dwallbank@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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