Analysis: U.S. budget deal could bring truce, minimize shutdown threats

WASHINGTON Sun Dec 8, 2013 11:28am EST

A view of the Capitol Building in Washington October 15, 2013. REUTERS/Joshua Roberts

A view of the Capitol Building in Washington October 15, 2013.

Credit: Reuters/Joshua Roberts

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WASHINGTON (Reuters) - A minimalist U.S. budget deal that congressional negotiators hope to reach in coming days will do almost nothing to tame rising federal debt, but it could usher in a nearly two-year fiscal truce, minimizing the risk of future funding crises and government shutdowns.

If the accord comes together, it would blunt some of the automatic "sequester" spending cuts and set funding levels at around $1 trillion for fiscal 2014 and 2015 for government agencies and programs from the military to national parks.

Such a deal would not address an increase in the federal borrowing limit, which is expected to come up again by the spring, leaving conservatives a pressure point to try to exploit.

However, it might restore some order to the federal budget process, which broke down years ago and has been replaced by stopgap funding measures, accompanied by brinkmanship and shut-down risks.

"If this holds together, it is a very good story," said Greg Valliere, chief political strategist at Potomac Research Group, which advises institutional investors.

"The chances of another Washington budget crisis have diminished greatly, and I think it increases the chances that the economy surprises to the upside," he said.

Two U.S. senators on Sunday expressed optimism that a two-year budget deal could be reached soon. Republican Senator Rob Portman, who sits on the House and Senate negotiating panel, told the ABC program "This Week" that he was hopeful an agreement could be struck "by the end of this week."

Richard Durbin, the second-ranking Senate Democrat, said the talks were "moving in the right direction."

Some argue that the deal, which would trade some of the sequester cuts - perhaps $30 billion to $40 billion a year - for a mix of fee-based revenues and other savings, would mark the death of ambitious efforts to reduce deficits.

"I don't really see a natural way for there to be a grand bargain during the rest of the Obama presidency," which ends in January 2017, said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that urges fiscal responsibility.

NEGOTIATIONS STILL UNDER WAY

The negotiations under way stem from the deal that ended the government shutdown in October, which set up a House-Senate conference committee led by Republican Representative Paul Ryan and Democratic Senator Patty Murray.

They are still struggling to pin down the final details of their modest compromise before the House ends its session for the year on December 13.

Among the proposals under discussion are a doubling of airport security fees levied on airlines to about $5 per ticket, and a plan to require federal workers to contribute a higher percentage of their income towards their pension plans, according to people familiar with the talks. Other items include funds raised by auctioning some government-held telecommunications airwaves or hiking corporate fees for the U.S. agency that protects workers' retirement funds.

Democrats have objected to the hike in federal employee's pension contributions, which they view as a benefit cut.

Republicans backed by the conservative Tea Party movement also are objecting to the idea that a Ryan-Murray deal could push spending levels above the $967 billion cap set by the sequester, sacrificing what they view as essential savings.

If no House Democrats vote for a Ryan-Murray deal, the Tea Party group is large enough to prevent its passage.

After the public relations disaster suffered by Republicans as a result of the October shutdown, few conservatives are showing any interest in a repeat performance.

"I don't think there's any use of government shutdown threats if we can get something out of the conference committee," Representative Blake Farenthold of Texas, a Tea Party supporter, told reporters on December 3. "I think we'll get bipartisan support on something a conference committee comes up with."

Obama and his fellow Democrats in Congress also have warned that they want a one-year extension of federal unemployment benefits that are set to expire the end of this month. A Senate Democratic aide said on Saturday it was still unclear whether such an extension would be included in the deal.

While the savings would be small, the deal would bring some much-needed order to a chaotic budget process in Congress that has broken down over the past few years, leaving Congress lurching from one stopgap funding resolution to another.

House Appropriations Committee Chairman Harold Rogers, a Republican critic of the deep sequester cuts, said he is now willing to live with only modest relief, and is determined that Congress pass annual spending bills for the first time since 2009.

"We need to get the train back on the tracks," said Rogers, who is from Kentucky. "If we get a 2015 number, we can do that."

(Additional reporting by Caren Bohan and Aruna Viswanatha. Editing by Fred Barbash and Christopher Wilson)

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Comments (19)
4825 wrote:
The country is at a point of needing some real ledership. I think anyone being honest with theirself would agree that the group we have is not getting the job done. We need more of the Conservative Tea Party politicians in the majority so we can get the country on a sound fiscal footing. If we continue putting extreme liberals in office we will go over the fiscal cliff. It won’t be a question of if, only when. Think about it in terms of your own household. You can not borrow and spend yourself into prosperity, even though that is what our liberal political freinds think they can do.

Dec 08, 2013 12:03pm EST  --  Report as abuse
baroque-quest wrote:
Remove the cap on taxing FICA earnings and allow FICA to be deducted from all executive pay, including bonuses, stock, and other perks. Do not allow the wealthy to collect Social Security payments. Raise the Social Security retirement age, slowly, in stages.

Do not build the Long-Range Strike Bomber (LRS-B) which has a *starting* price of $550 million per bomber. Stop building obscenely expensive offensive weapons of war, except for attack submarines to counter China.

Do not interfere in Syria. Get out of Afghanistan. Stop supporting Afghanistan, Israel, Pakistan, Egypt, Sudan, and Ethiopia, all of which are given large amounts of economic and military aid each year.

Corporate taxes must be inversely proportional to the percentage of Americans employed, including both direct (on the payroll) and indirect (via parts and retail goods) workers.

Eliminate H-1B and other visa fictions for all people with less than a master’s degree.

Revise tort statutes to stop welfare for shysters.

Dec 08, 2013 12:41pm EST  --  Report as abuse
xyz2055 wrote:
4825..the most delusional post I think I’ve ever read. “Extreme Liberals”? It doesn’t get much more “extreme” than the Tea Party. Eliminate the Fed, simply stop paying the bills (which is against the Constitution, btw) and instantly eliminate big chunks of government. If the Tea Party had their way the U.S. would be in massive chaos. What I believe is needed is more moderates on all sides..willing to work together and put everything on the table and then SLOWLY turn the ship around and get it moving in the right direction.

Gridlock was created primarily by Republicans in an effort to make Obama a 1 term president. That didn’t happen and it’s now a “moot” point. Obama has no more elections to win and is in “lame duck” mode. I think the Republicans realize that creating more drama is going to hurt them in the 2014 med terms. If the Tea Party doesn’t respond in kind…they will lose BIG TIME in the mid terms. I believe most “reasonable” Americans want to see orderly government and less conflict.

Dec 08, 2013 1:05pm EST  --  Report as abuse
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