House Dodges U.S. Debt Default in Bipartisan Budget Pla

  • Plan reduces chances for government shutdown in December
  • Bill goes to Senate for vote before Nov. 3 default deadline

The House passed a two-year budget plan that averts a U.S. debt default in a rare bipartisan vote that signals a possible end to fiscal battles that have marked most of President Barack Obama’s years in office.

The legislation would extend U.S. borrowing authority until March 2017, after Obama leaves the presidency, meaning conservatives can no longer threaten to force a default in an effort to win unrelated policy changes. Congress took the U.S. to the brink of default in 2011 and 2013. The 266-167 vote Wednesday sends the measure to the Senate, which plans to consider it in time to meet a Nov. 3 deadline to raise the debt limit.

"If we do not approve this budget, then what?" House Armed Services Chairman Mac Thornberry, a Texas Republican, said on the House floor. "Then we’re back to continuing resolutions and sequester," he said, referring to short-term budget bills and spending caps.

The House voted just hours after Republicans nominated Paul Ryan of Wisconsin to succeed Speaker John Boehner of Ohio, who is leaving Congress after repeated battles with conservatives in his party. Most recently, members of the hardline Freedom Caucus had threatened to shut down the government Oct. 1 in an effort to defund Planned Parenthood, the women’s health care provider whose services include abortion.

The measure was backed by 187 Democrats and 79 Republicans, including Boehner in an unusual vote as speaker before he resigns Thursday. All of the votes against the bill were cast by Republicans.

"You do the math," Senate Minority Leader Harry Reid, a Nevada Democrat, said after the vote. "The vast majority of Republicans serving in the house wanted to default on the debt, which would be catastrophic."

The Obama administration expressed support for the budget deal, saying it would provide "significant relief" from spending limits while investing in education, job training, research and defense.

Second-ranking House Democrat Steny Hoyer of Maryland said the agreement lessens the chance of a shutdown in December, but "it doesn’t remove it."

‘Robbing’ the Future

Representative Darrell Issa, a California Republican, said he would vote against the deal because he objects to mechanisms lawmakers used to keep the legislation from increasing the deficit. He cited a provision to sell oil from the Strategic Petroleum Reserve as an example of "robbing from the future."

"I will not sell our future for this year’s budget," Issa said.

The plan includes a two-year deal on defense and non-defense spending levels, though lawmakers still must work out details before the government’s current funding expires on Dec. 11. Spending caps would be increased by $80 billion in 2016 and 2017 and paid for with savings and revenue in the future.

In September, Congress approved a short-term spending bill to keep the government operating after Boehner announced he would resign from Congress. Some Republicans criticized the latest deal for being secretly negotiated without enough input from rank-and-file lawmakers. The Freedom Caucus called it a "fiscal monstrosity."

Process ‘Stinks’

Even Ryan, while supporting the agreement, said this week the private negotiation process "stinks" and that he would give rank-and-file Republicans more of a say in running the House. He is scheduled to be elected speaker on Thursday.

“As with any budget agreement, this one has some good, some bad, and some ugly,” Ryan said in a statement. “If I’m elected speaker, we will begin a conversation about how to approach these big issues -- as a team -- long before we reach these kinds of deadlines."

Senate Majority Leader Mitch McConnell of Kentucky said his chamber will quickly start weighing the legislation.

"It’s not perfect, far from it," McConnell said on the Senate floor Wednesday. Still, he said it includes "the most significant reform to Social Security since 1983" as well as additional defense funding.

‘Increasingly Confident’

Second-ranking Senate Republican John Cornyn of Texas said he’s "increasingly confident" enough Republicans will vote to move forward with the budget agreement.

The measure, H.R. 1314, gives Obama almost 90 percent of the additional money for domestic programs he asked for in February and lifts spending limits that the administration contended were hindering the economy. Obama told a meeting of police chiefs in Chicago Tuesday that the plan was "good news for everybody."

It would also lift separate caps on defense and non-defense spending in equal amounts in fiscal years 2016 and 2017. For 2016, the caps are lifted by $25 billion in each category and in 2017 the caps are lifted by $15 billion.

Boehner counted on Democrats for votes to bypass opposition from conservative Republicans including members of the Freedom Caucus. Caucus member Mo Brooks of Alabama called the accord “financially irresponsible” because it would increase spending. Two conservative groups, Club for Growth and Heritage Action, announced their opposition in a joint statement that called the agreement a “zombie budget deal.”

Petroleum Reserve

The deal is paid for, in part, by the U.S. selling 58 million barrels from the Strategic Petroleum Reserve. It also changes the way partnerships such as hedge funds and private equity firms are audited in order to increase tax compliance, raising $11 billion, according to the Congressional Budget Office.

The proposal uses war funds, which aren’t subject to budget caps, to increase defense spending, something Obama previously opposed. It would raise the Defense Department’s overseas contingency operations and the State Department’s war funds by more than $7 billion apiece each year over the Obama budget request. The White House had projected a larger decrease in war funds due to the end of the conflict in Afghanistan in 2017 but the budget deal maintains higher spending levels through 2017.

Negotiators dealt with a pending shortfall in the Social Security Disability Insurance program before it began running out of money, which the agency’s trustees said would happen weeks before the November 2016 presidential election.

Democrats had sought a simple transfer of payroll tax revenue from the Social Security retirement fund to the disability account to cure the shortfall. Republicans got changes to the program but agreed to allow the adjustment, temporarily increasing the contribution from 1.8 percent to 2.37 percent of wages.

Medicare Premiums

The deal would prevent a major increase in Medicare premiums next year for some recipients by applying a surcharge in later years. It would also increase rebates drug manufacturers must pay to federal and state governments to cover the costs of Medicaid and change the way Medicare pays for services at hospital-owned doctors’ offices.

Medicare Part B premiums for some recipients would be partially increased but they won’t have to pay all of a projected 52 percent spike in premiums, from $104.90 a month to $159.30. Under the deal, these high and low-income recipients -- about 30 percent of all Medicare beneficiaries -- would be charged an extra $16 a month.

These Medicare beneficiaries would also pay a $3 monthly surcharge until a general-revenue loan to the Medicare fund to cover the limit on premium increases is repaid. Higher-income recipients would pay even larger amounts, which will be graduated upward depending on their income bracket.

Boehner reiterated Tuesday that he wanted to “clean the barn” before Ryan takes over as speaker, and also said the new agreement is similar to the two-year pact Ryan negotiated in 2013 with Democratic Senator Patty Murray.

The urgency of acting to extend the government’s borrowing authority was highlighted by the Treasury Department’s decision Oct. 22 to postpone an auction of two-year notes. The Treasury said that “due to debt ceiling constraints, there is a risk that Treasury would not be able to settle the two-year note” on Nov. 2.

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