Now that the U.S. Senate has given final Congressional approval to a bipartisan budget deal, that solves everything on the budget, right? Sorry, Virginia, in this case, there isn’t a legislative Santa Claus, as lawmakers will still have to do some work after the New Year to follow through on this agreement and keep the government running in mid-January.
Here are ten things that maybe you didn’t know about the budget deal:
1. This deal does not prevent a government shutdown
I don’t care how many times you have heard a member of Congress say it in the last week – this agreement does not prevent a government shutdown. What it does do is lay the groundwork for that job, as this budget agreement has two basic parts – it sets out spending levels as part of the budget framework for what’s known as the “budget resolution,” and also includes changes to mandatory spending, which would save $85 billion over ten years.
What it means is that when Congress reconvenes the week of January 6, the House and Senate will still need to approve a spending bill that funds the government for the rest of the fiscal year (through the end of September) – or for a shorter time frame while an Omnibus spending plan is fashioned by the House and Senate Appropriations committees, using the budget framework of the budget resolution approved by the Congress in this deal – that allows for $1.012 trillion in discretionary spending in Fiscal Year 2014 and $1.014 trillion in Fiscal Year 2015.
While many of us will take time off over Christmas, committee staffers will be working out the specific details of the appropriations bills. So, while the chances of a shutdown seem very remote, there is still work to do in the halls of Congress on the actual budget bills in the New Year. The deadline for action is January 15, 2014.
2. This deal does not get rid of sequestration
Yes, this bill would restore $62 billion in sequester cuts in 2014 and 2015 – but it leaves in place sequestration cuts and reductions as envisioned by the 2011 Budget Control Act in future years. Democrats had wanted to wipe away the entire sequester by enacting new tax increases, but that went nowhere in this bipartisan deal.
As for the yearly budget caps, the only changes made by this budget deal are in 2014 and 2015 – otherwise, the post-sequester caps are all the same. If you want to imagine a world without the sequester from 2016-2021, then add about $90-$100 billion more to the discretionary budget figures below:
2014 – $1.012 trillion
2015 – $1.014 trillion (+$2 billion)
2016 – $1.016 trillion (+$2 billion)
2017 – $1.040 trillion (+$24 billion)
2018 – $1.065 trillion (+$25 billion)
2019 – $1.092 trillion (+$27 billion)
2020 – $1.120 trillion (+$28 billion)
2021 – $1.146 trillion (+$26 billion)
3. The Pentagon will avoid another $20 billion in cuts
Because this deal restructures part of the sequester, the military will not be hit with the next scheduled round of automatic cuts, which would have totaled around $20 billion on January 15, 2014.
Instead of a budget cap of $498 billion in 2014, the Pentagon would get just over $520 billion in new budget authority; That ticks up slightly to $521 billion for 2015. It is basically a budget freeze for the Pentagon instead of an actual cut because of the sequester cuts.
4. This deal does not do anything on the debt limit
Even before the final vote in the Senate, Republicans in Congress have been making noise about a larger political battle over the debt limit. Officially, the debt limit extension approved by Congress earlier this year would extend it until February 7 – but the showdown may well go past that deadline.
So far, the budget deficit is running 22% below where it was a year ago, and if the Treasury Department can squeeze out some accounting maneuvers in the spring, the big influx of tax payments for the April 15 IRS deadline could well delay the need for a big legislative fight on the debt limit until the summer.
GOP lawmakers say they want to attach budget-cutting conditions to any debt ceiling increase; the White House again made clear on Wednesday that the President will not negotiate on that point.
5. A military retirement pay provision may be changed
Hours before the final vote in the Senate on the budget deal, key lawmakers in both parties made clear that they will push to make certain changes in a controversial provision that would limit the yearly cost of living increases for military retirement pay.
“Making decisions regarding future spending cuts will be difficult and painful, but the solution should require contributions from all Americans, not just our service members who have sacrificed so much,” said Sen. Saxby Chambliss (R-GA).
“We can fix this,” said Sen. Mark Pryor (D-AR).
There is no need to rush any fix, as the military retirement pay provision does not go into effect until late in 2015. Lawmakers would have to replace the $6 billion in savings under the plan, which is similar to proposals made by both parties to hold down the rate of yearly increase in Social Security and other government benefits.
While some like Sen. John McCain (R-AZ) said they found the move “objectionable,” McCain also acknowledged that military retirement reforms must be considered if one is serious about making major changes in how the government spends money. Just look back at the Simpson-Bowles report, which called the total elimination of the yearly COLA for military retirement pay – then at age 62, retired servicemembers would get a one-time “catch up” adjustment in their retirement pay.
6. New federal workers also face retirement changes
Several listeners asked me why lawmakers focused on military retirement pay in this budget agreement, and not on the pensions of federal workers. My answer is simple – this budget deal does include provisions that limit civil service pensions, which would also save $6 billion (like the military retirement pay provision).
Under the plan, federal workers hired after January 1, 2014 would have to contribute a larger percentage of their pay for future pension benefits. Unlike the provision on military retirement pay, which does not take effect until late 2015, these changes begin immediately in the New Year.
Federal worker unions had tried to force changes in the plan, but it was obvious in the past few days that military retirees have much more clout in the Congress than the unions representing the federal civil service.
7. Companies with pensions face a bigger bill with Uncle Sam
Under the budget deal, companies that offer traditional pension plans will face another increase in pension insurance premiums for a second time in two years, bringing in $8 billion under this agreement.
The money goes to what’s known as the Pension Benefit Guaranty Corporation, a little-known government agency that steps in to cover pension payments for retirees when a company goes bankrupt.
The budget deal would force private sector companies that offer pensions to pay the feds $57 per covered worker in 2015, going up to $64 in 2016. Congress imposed higher fees last year that brought in $9 billion.
8. Why is the “Death Master File” in this budget deal?
Yes, there is a provision in this bill that deals with what is known as the Death Master File, which would help save $269 million over ten years.
This has to do with identity theft, as the Social Security Administration maintains a master list of Americans who have died. Some lawmakers argue that it is wrongly used by criminals, who gather information on people who have recently died, and then use it to steal their identities. This bill would restrict access to that death list.
“Last year, the IRS issued $3.6 billion in potentially fraudulent tax refunds, and criminals are still able to use the identities of deceased Americans to steal millions of dollars each year,” wrote Sen. Bill Nelson (D-FL) in a letter last month.
9. Budget deal means more oil and gas drilling in the Gulf of Mexico
It hasn’t received much attention, but the budget deal does have provisions that give the green light to a 2012 agreement between the United States and Mexico, which will allow for the development of oil and gas resources which are located near the international sea borders of the two countries in the Gulf of Mexico.
The move certainly won’t mean an immediate increase in drilling, but it will lay the groundwork for future joint ventures in the Gulf of Mexico, which is currently producing 17% of energy resources in the United States.
10. The deal could mean higher airline ticket prices
Whether you call it an “airline ticket tax” or an “aviation security fee” – commercial airline passengers will be paying more under this budget deal.
The security fee – instituted in the aftermath of the September 11 attacks – is currently at $2.50 for a non-stop flight; it is $5 for flights with multiple stops.
The new fee has no limit – in other words, there is no $5 cap for a multiple stop flight itinerary. Instead, the new fee/tax is $5.60 per flight segment.
The Congressional Budget Office estimates that will bring in $12.6 billion over ten years. The airlines collect the money and then send it in to the Transportation Department, where it is put to use for airport security measures.