CHN: House Passes Two-Year Bipartisan Budget and Goes Home, Letting Unemployment Insurance Expire; Senate to Take Up the Budget Bill This Week

For 332 members of the House of Representatives, certain imperatives drove their votes to pass a two-year budget:  undo at least some of the impending cuts, and prevent the government from shutting down again on January 15.  They got that.  Republicans were able to say they did it without raising taxes, and that the end result would be to reduce the deficit some more.  Democrats could point to preventing   cuts to programs like Social Security, Medicaid, or SNAP/food stamps.  That was enough to convince 169 Republicans and 163 Democrats to vote for the Bipartisan Budget Act on December 12.  Sixty-two Republicans and 32 Democrats opposed the bill.  The Republican opponents wanted to cut more.   For the Democrats opposed, the failure to extend unemployment benefits for the long-term jobless was a key reason.  Federal unemployment insurance will expire December 28, and 1.3 million people will lose benefits immediately.  (See article this issue.)  In addition, some opposed the higher payments into retirement accounts required of new federal employees.
The budget (H.J. Res 59) sets appropriations totals for FY 2014 (the current fiscal year) and FY 2015.  It changes the deficit reduction law by increasing the amounts that can be spent in those two years by $63 billion.  In FY 2014, the budget the House voted for will enable domestic appropriations to be $22.4 billion more than was spent in the previous year.  That will make it possible to restore some of the lost services caused by sequestration in FY 2013 in programs such as Head Start, rental vouchers, meals for seniors, and many other areas.

The sequestration cuts are not eliminated, but instead of cuts to the Pentagon and domestic/international appropriations of about $109 billion a year, the cuts will be $64.6 billion in FY 2014 and $90.9 billion in FY 2015.  The budget agreement does not do anything to reduce the sequester cuts in FYs 2016 – 2021, which will revert to $109 billion a year unless Congress takes further action.  In fact, in order to pay for the modest reduction in cuts to appropriations, the budget plan extends cuts to mandatory programs (prominently Medicare) for two additional years.

By setting appropriations totals at $1,012.2 billion in FY 2014 and $1,013.6 billion in FY 2015, the budget allows the House and Senate Appropriations Committees to determine program-by-program spending levels.  Updating priorities through these spending decisions is far preferable to another year of the same levels for almost all programs.  The appropriators will have to assemble an Omnibus spending bill (one that combines all areas of discretionary (appropriated) spending, instead of passing separate appropriations bills) so that it can be voted on by Congress before January 15, when the current temporary funding measure runs out.

The budget provides nearly $45 billion more in FY 2014 for appropriations, divided equally between defense and domestic/international programs.  In FY 2015, a little more than $18 billion is added, for a total of $63 billion.  The plan saves about $85 billion through FY 2023, thereby providing another $22 billion in deficit reduction.

In addition, the House added a three-month suspension of a long-avoided reduction in payment rates to physicians under Medicare, and also extended the Transitional Medicaid program (for low-income families that leave Temporary Assistance for Needy Families for employment), and the Qualifying Individual (QI) program, which assists near-poor people who qualify for Medicare by using Medicaid funds to pay for their Medicare Part B premiums.

What are the savings in the budget plan?  The budget asks federal workers and military retirees to pay more towards their retirement, increases security fees for air travel, increases customs user fees, captures overpayments of unemployment insurance and seeks more private insurance payments in place of Medicaid expenditures (for example by arranging for more non-custodial parents to cover their children through their employer-provided health insurance).  Savings would come from oil and gas industry, from such measures as discontinuing a research project and sharing hydrocarbon revenues with Mexico from the Gulf of Mexico.

A substantial part of the budget’s savings ($28 billion), comes from extending the cuts to Medicare and other mandatory programs another two years (in FYs 2022 and 2023).  The sequestration cuts do not only apply to appropriated programs.  Certain mandatory programs are also affected, including a 2 percent cut to Medicare service providers, cuts to the Social Services Block Grant, reductions in unemployment benefits, and certain cuts to child welfare services.  In FY 2014, almost $19 billion out of a total of nearly $65 billion in cuts come from mandatory programs, with Medicare taking the biggest dollar reduction.  There are no tax increases.

What is not in the Bipartisan Budget Act?  The negotiators of this deal, House Budget Committee Chair Paul Ryan (R-WI) and Senate Budget Committee Chair Patty Murray (D-WA) recognized that they could only hope to craft a narrow agreement.  As already noted, they left out Unemployment Insurance.  They also did not close a single tax loophole, and so did not generate enough new revenue to meet needs and create jobs.  By agreeing to reduce the sequester cuts for two years (very minimally in FY 2015), they made it very difficult for advocates to seek needed expansions in services until FY 2016, a long time to wait when the economy is still weak and opportunities are very slim for low-income people.

On the other hand, the budget also mostly avoids cuts to Medicaid, Social Security, and SNAP.

What happens next?  The Senate must now vote on the same plan approved by the House.  Majority Leader Reid filed to limit debate on Sunday, and the budget is expected to come to the floor on Tuesday.  Since the House has already left for its holiday recess, if the Senate votes to reject the budget, it will most likely mean that Congress will have to scramble in early January to pass something to avert a government shutdown.  Appropriators will not be able to create an omnibus spending bill, but will instead be forced to continue current spending levels with little discretion to update priorities.

Passing the Bipartisan Budget Act in the Senate will require 60 votes – so support must indeed be bipartisan.  Because so many Republican Senators running for reelection in 2014 are facing primary challenges from ultra-right-wing candidates, a number have announced their opposition to the budget, including Minority Leader Mitch McConnell (R-KY).  Although the House Republican leadership clearly supported the Bipartisan Budget Act, in the Senate there is a split.  Further complicating the bill’s prospects is the possibility that some Democrats will oppose the bill because of the failure to extend UI.  If that occurs, more Republican votes will be needed.

Budget and Appropriations
child care
Policy Analyses and Research