Members of Congress are congratulating themselves on a budget accord set to win final passage this week. Business leaders aren’t celebrating, saying the deal leaves too much unfinished business.
The budget plan doesn’t extend unemployment insurance for the chronically jobless. It doesn’t continue more than 50 tax breaks that will lapse on Dec. 31 including the research and development tax credit used by companies such as Intel Corp. (INTC)
It won’t prevent the next debt limit fight after borrowing authority is set to lapse in February. And it does little to fix a broken process that hasn’t produced a formal budget in four years and has led the government to be funded primarily through stopgap spending bills since 2011.
“It’s not all kumbaya,” said Greg Valliere, chief political strategies at Potomac Research Group, a Washington firm that advises investors. “There are still enormous differences on taxes, on immigration. This would not suggest that all these differences would be quickly resolved. But I think the temperature has been lowered.”
The House in a bipartisan 332-94 vote Dec. 12 passed a $1.01 trillion budget plan that’s main accomplishment is easing $63 billion in automatic spending cuts over two years. The Senate will begin considering it tomorrow, Majority Leader Harry Reid said. President Barack Obama said he’ll sign it into law.
“The long-term business investment needed by our country simply will not occur in an environment of fiscal instability,” Randall Stephenson, chairman and chief executive officer of AT&T Inc., wrote to senators on behalf of the Business Roundtable. The “legislation, while not perfect, offers stability and the opportunity for the U.S. government to once again operate responsibly within the confines of an approved budget.”
The Business Roundtable is an association of the chief executives of large corporations.
Supporters of the compromise budget including Senator Charles Schumer, a New York Democrat, predict enough Republicans would join Democrats to advance the budget when the Senate take up the issue.
“After what happened in the House, where so many Republicans voted for it, I think Mitch McConnell, the Republican leadership knows they can’t let it go down,” Schumer said today on MSNBC’s “Morning Joe.”
The changes to the automatic cuts known as sequestration don’t endanger the deal, said Grover Norquist, president of the small-government group Americans for Tax Reform. The pact technically doesn’t violate the group’s no-tax-increase pledge, Norquist said today at a Bloomberg Government breakfast, though he doesn’t like the increase in fees charged on airline tickets.
Lawmakers are eager to show that they’ve learned their lessons from a 16-day government shutdown in October and don’t want to govern from crisis to crisis.
Getting the budget agreement is a “huge event that breaks the logjam on getting away from these herky-jerky shutdowns that we’ve been going through now for all these months and years,” House Appropriations Committee Chairman Hal Rogers said in an interview that aired yesterday on C-Span’s “Newsmakers” program.
Still, one budget deal doesn’t erase years of fiscal dysfunction. Congress has passed all its individual spending bills by the deadline four times in only the almost 40 years since Gerald Ford was president, most recently in 1997, according to the Senate Historical Office.
Investors are encouraged about the budget deal as a first step, especially after the meltdown in October that led to the first government shutdown in 17 years and to the brink of a default of U.S. borrowing authority.
“The key takeaway is that the Republican leadership in the House has repudiated the extremists and that brinksmanship is quite unlikely,” Valliere said. “Instead of a headwind from Washington, there’s a gentle breeze.”
The volatility of the U.S. dollar in the last 90 days fell to 4.93 percent on Dec. 13 from a yearly high of 7.34 percent in September as a shutdown and debt ceiling crisis loomed, according to the Bloomberg U.S. Dollar Index that represents 10 major currencies weighted by liquidity and trade flows.
Lawmakers will go home this week and won’t return until January, leaving 55 tax breaks to lapse on Dec. 31. They include a tax credit for research and development and the ability for individuals to deduct state sales taxes instead of income taxes, which is important to residents of states including Washington and Texas that lack income taxes.
Congress has previously extended many of those breaks retroactively. Some of the lapses may have an immediate effect, including a drop in the maximum monthly tax-free spending on mass-transit commuting. The reduction to $130 from $245 will disproportionately affect long-distance commuters.
Senate Democrats are confident they have the votes to pass the budget measure and send it to Obama for his signature.
Republicans who vote against the budget plan will be committing “political suicide,” Reid said Dec. 13 in an interview for Bloomberg Television’s “Political Capital With Al Hunt.”
The Senate will need at least five Republican votes if all 55 Democrats in the chamber vote for the plan. Reid predicted strong support, saying, “We’ll get our votes.”
Still, at least one Democrat facing re-election next year in a state Obama lost in 2012 hadn’t decided Dec. 13 whether to support the measure. Arkansas Senator Mark Pryor told reporters he was still considering whether he’d vote for the plan.
Another Democrat seeking re-election next year in a Republican-leaning state -- Mary Landrieu of Louisiana -- said she would support it, as did West Virginia Democrat Joe Manchin, who often breaks with Democrats.
Republican Senators John McCain and Jeff Flake of Arizona, and Susan Collins of Maine told reporters Dec. 13 that they’d vote to advance the bill and help it overcome the 60-vote threshold. With Senators Ron Johnson of Wisconsin and Johnny Isakson of Georgia offering support, the budget would have enough Republican backers to advance.
Senator Richard Burr,a North Carolina Republican, late today said he would vote against because the budget proposal would let the Senate increase spending and raise taxes with a simple majority vote, rather than 60 votes. Burr earlier said he would vote to advance the bill for a final vote.
Four other Senate Republicans -- Dan Coats of Indiana, Bob Corker of Tennessee, Thad Cochran of Mississippi, and Mike Johanns of Nebraska -- said they hadn’t decided whether to vote to limit debate on the measure.
Senator Ted Cruz, a Texas Republican and a leader of the faction of lawmakers who insisted in September on changes to the 2010 health-care law to fund the government, said the bipartisan budget plan moves the country “in the wrong direction: it spends more, taxes more, and allows continued funding for Obamacare.”
After passing a budget, lawmakers will have another step to avoid a shutdown. Congress, returning in January, will have less than two weeks to pass legislation setting spending levels. Current funds for government operations expire Jan. 15.
Congress will enter 2014 with a chance to get its fiscal act together. Rogers and his Senate Democratic counterpart, Barbara Mikulski of Maryland, will have nine months to agree on spending details for fiscal year 2015, which starts Oct. 1.
To some in Congress, budget certainty is still an open question.
“The jury’s still out on where we go from here,” said Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee. “Whether this is a sign for the future or just a one-off, we don’t know.”
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