Skip to comments.Some Thoughts on the Budget Deal
Posted on 12/11/2013 10:10:15 AM PST by SeekAndFind
The actual text of the Ryan-Murray budget deal came out late last night, so its only now possible to really consider the particulars and see how it looks. It seems to me that the details look a fair bit better than the general outline that had been reported in the press over the past week or so, particularly on the question of whether the entitlement cuts that would replace some discretionary sequester cuts could be expected to actually materialize.
As it stands, this strikes me as more or less a very small-scale version of the sort of thing that Republicans hoped might be made possible by the sequester but Democrats insisted could not be: a trade of discretionary savings for mandatory savings without real tax increases. The latter point depends on your view of user feesI generally think funding government services through user fees is much better than doing so through general revenue, so I take a move toward (slightly) greater reliance on such funding in a few programs to be a reduction in the burden on taxpayers in general without an increase in the size of government. Thats a good thing, but its certainly not unreasonable to describe such user fees as targeted taxes either. What the Democrats didnt get is what they want and have insisted they would not do without: income tax increases.
This deal would amount to the Democrats accepting the implications of their misjudgment in abiding the Budget Control Act in 2011: accepting discretionary spending levels below BCA levels (and below even the original Ryan budget levels) and cementing the precedent of trading discretionary for entitlement cuts and of making budget deals without higher tax rates. And by avoiding another government shutdown fight, it robs the Democrats of one of the few escape routes they might have from the political nightmare that Obamacares rollout has been and will continue to be for them. Its not exactly a deal to be celebrated, because its a very tiny step and does nothing to address the horrendous fiscal problems of our entitlement system. But the Democrats have made it abundantly clear that those wont get addressed while they control the Senate and the White House, and under the circumstances this strikes me as a good deal worth voting for.
What follow are a few reflections on the contours of the deal, on its benefits, and on its risks and costs.
Most simply stated, the agreement would raise the discretionary spending levels set by the sequester by about $45 billion in 2014 and by about $20 billion in 2015, in each case divided evenly between defense and non-defense discretionary increases. That basically amounts to half of the sequester cuts that were supposed to take spending below the BCA spending caps in 2014 and a quarter of those that were supposed to do so in 2015. This sequester relief (i.e. increased spending) would then be entirely offset, and about $22 billion in additional deficit reduction would be achieved over 10 years, by (very) modest entitlement reforms that take effect over a longer period, by increasing user fees on a few government services paid for directly by people who use them, and by essentially extending the mandatory-spending portion of the sequester an additional two years.
The entitlement savings would come almost entirely from non-health entitlementsthere are some modest Medicaid savings in the deal but no major reform, and nothing on Medicare or Obamacare. There is also nothing on Social Security. Instead, the cuts come from things like increasing the contributions federal employees have to make to their pension fund, changing rules to reduce fraud in the unemployment insurance system, repealing some relatively small corporate giveaways, and raising the premiums paid by companies with federally guaranteed pensions. Such small potatoes can add up to a deal here because the change to the sequester is also quite small.
These sorts of modest other entitlement reforms have been around as part of assorted Republican and Democratic sequester-replacement proposals for several years. They have generally been included in those proposals along with other, much larger ideasstructural reforms of the major entitlements for Republicans and tax increases for Democrats. What Murray and Ryan have done here is take all the little ideas that have long been basically agreed on by both parties and put them together without the bigger ones that divide the parties.
Indeed, what stands out most as a general matter about this proposed agreement is how very small it isfor good and bad. It involves about $65 billion over the next two years (a bit less than nine-tenths of one percent of projected federal spending over that period). It doesnt much change the terms reached in the original Budget Control Act and sequester deal, and essentially cements the Democrats loss and miscalculation in that deal. The Democrats hope, given that they control both the White House and the Senate, was to replace the sequester with some combination of tax increases and more palatable spending cuts. The Ryan-Murray deal would say instead that about 30 percent of the sequester over the next two years will be replaced with modest (and much more sensible) longer-term entitlement savings and other small reforms, and thats it. 70 percent of the sequester remains in place in those two years, and after those two years the entire sequester remains in place. A comparison of discretionary spending in the absence of the sequester, with the sequester, and under the proposed Ryan-Murray deal, would look like this:
That the Democrats would accept a deal like this is a pretty striking indication of how the Republican House has changed the conversation on the spending front since 2010. Think of it this way: In their first budget after re-taking the majoritythe FY 2012 Ryan budget, passed in 2011the House Republicans wanted discretionary spending to be $1.039 trillion in 2014 and $1.047 trillion in 2015. These budgets were of course described by the Democrats and the political press (but I repeat myself) as some reversion to humanitys barbaric past. Yet this proposed deal with the Democrats would put discretionary spending at $1.012 trillion in 2014 and $1.014 trillion in 2015in both cases below that first House Republican budget.
The risk and worry for conservatives in a deal like this is that it replaces some near-term discretionary cuts with entitlement cuts that mostly happen in the out-years. Thats the argument some of the critics of this proposal have made as its general outlines have been reported in the last few days. But the details of the deal should at least in large part put those concerns to rest. The basic difference between discretionary and mandatory spending, after all, is that while discretionary spending has to be legislated anew each year, mandatory spending essentially functions by rule and remains in place until that rule is changed. This is part of the problem with our larger entitlements, of course: They run on autopilot, and building the political will to change course has proven extremely difficult. But in this case, that works in favor of the possibility that these cuts will survive. Because they touch on relatively low-salience mandatory programs, these changes would have to be actively undone to be reversed, and its not easy to see the circumstances under which, say, the amount paid by federal workers into their pensions would become a high enough priority for the Democrats that they would fight to lower it in a future budget deal. Mandatory spending out-year cuts have a much better record of actually materializing and remaining in place than discretionary spending out-year cuts.
Thats no guarantee that these cuts would remain in place, of course, and there could never be any such guarantee. But if you look at them individually, it certainly looks pretty likely that they will, and therefore that the downward effect on overall federal spending will have a good chance of persisting through and beyond the budget window and so that over the coming decade, though not in this next year, this deal looks reasonably likely to result in slightly lower rather than higher overall federal spending than we were on a course to achieve without it.
And to be sure, that course was not likely to be sustained in any case. The Republicans dirty little secret in this process has always been that their own appropriators hate the sequester almost as much as the Democrats do. In the absence of a deal like this, its not all that likely that the sequester could have held for another year or two, and from the point of view of conservatives one of the key benefits of this kind of deal, if it does get enacted, would be to sustain the lower spending levels over the budget window despite the lack of majority support for the sequester in Congress.
Of course, that lack of support for lower spending levels among some Republicans is a source of great (and justified) irritation and anger for conservatives, in and out of Congress. The Republican appropriator class is a problem to be solved, without a doubt. But the idea that forcing that problem into the open at this point by forcing another budget showdown would help the conservative cause just doesnt make much sense to menot only from the point of view of electoral politics but also from the point of view of conservative goals.
The goal of conservatives in national politics cant just be to have less of the same: the liberal welfare state at a slightly lower cost. That is basically what a sequester approach to the budget amounts to, after allno reform of anything, just a small bit of across the board spending pressure. The goal, rather, should be to transform American government along conservative lines, into a government that works to sustain and expand the space between the individual and the state, to strengthen the market economy and make its benefits accessible to more Americans, to help the poor not with an empty promise of material equality but with a fervent commitment to upward mobility, to strengthen the middle class by lifting needless burdens off the shoulders of parents and workers, and to put an end to the cronyism and corporatism that have come increasingly to characterize the relationship between the private and public sectors. Such a government would certainly cost less, would have little room for the way of thinking embodied by Republican appropriators (and all the more so by congressional Democrats of course), and could help avert the fiscal catastrophe we face if our major entitlement programs are not reformed, but it would do far more than that.
Republicans have used their House majority (very much including the budgets they have passed) to set out some elements of such an agenda, but they know they cannot make much progress while Democrats control the Senate and the White House. Their goals while that remains the case should be to make what modest gains they can, to develop that agenda further (and much work remains to be done on that front), and to improve their chances of winning future elections.
A government shutdown fight, which would easily play into the Democrats hands and allow them to distract the public from the ongoing failures of Obamacare (among their other troubles), would surely be a setback for this cause. And we have after all seen very recently that congressional Republicans are not in good shape to make meaningful gains in such a fight at this point. By now even the people who argued most fervently for insisting on defunding or repealing Obamacare in the last budget battle have acknowledged they didnt really believe that could happen in such a fight. Simply doing it over wont change the players or the circumstances, however much we might wish we could change both, and wont advance the conservative cause.
A deal that keeps in place 92 percent of the sequester, replaces the rest (and adds more savings) with fairly durable mandatory savings and other small reforms, and avoids the tax increases the Democrats want would, I think, advance that cause a little.
Theres not much to celebrate here, and there wont be until the Democrats no longer control the Senate and the White House, but theres not much to bemoan either, and this deal would make it more likely that the Democrats will lose that control.
While I agree that a user tax is preferable to an income tax, let's not kid outselves that both aren't equally taxes and both generate "general revenue". The plan calls for spending increases now, tax increases now and promised "savings" to occur somewhere down the road. I've seen this movie before.
Looking at the graph, it restores growth in spending to the same slope as before the sequester cut in, with the proposed offsets kicked down the road to a future Congress to implement.
Honestly, five years without a budget and Yuval Levin
thinks there is ever going to be one with Obama in office.
It will be a long stream of continuing resolutions until
a republican is president again. Then it will be demanded
by the same people who are keeping one from passing now.
Its 10 years to break even spending money we don’t have and promising not to spend money we don’t have down the road. Of course the dumbles agree. They get their increased spending and only have to promise to cut later.
What a GREAT plan....after 10 years we end up back where we are...
Spending increases in 2014 and 2015 and cuts over ten years, most of which will never happen. It is just a smokescreen for increased spending.
Also, no income tax hikes. Surprised the Dems didn't push for that.
No Gov't shutdown possibility before elections...also a good thing.
The minute they took over in 2011, they should have passed a real budget with specific, deep cuts in spending, total tax reform, repealing Obamacare, and putting SS, Medicare, and Medicaid on a fast track to privatization.
They should have refused to pass ANY legislation unless those criteria were met.
I like it because a government shutdown would only hurt Republicans more and make Obama and Democrats come out smelling like roses.
Under current political circumstances, this is the best deal conservatives could get - modestly smaller government or least putting the country on that road.
Without their having to commit political suicide and that’s a meaningful victory! In the meantime, Obamacare remains the political albatross around the Democrats’ necks in 2014.
It only offsets it if the savings are used to reduce taxes in a commensurate amount. As it is the savings by having the federal employees pay more are just being spent somewhere else.
Anyone who believes the budget deal will increase the spending TEMPORARILY has failed to learn Santayana’s dictum.
What I meant was that Federal employees having to pay more of their pension is WORTH a hike in user fees (IMO).
It's entitlement reform...a very small one...but reform nonetheless.
What I see in that graph is the Dems get a bump in discretionary spending that just happens to coincide with the 2014 Election.
the idiotic GOP appears desparate to strike a deal, any deal just to show they are “doing something”.
The fools have already gotten into place Sequester budgeting which forces decreases to spending. They do not need to do anything but let it play out.
instead, they are increasing spending.
Don’t they know that Americans realize more prosperity when Congress is a do-nothing Congress?
Author has a point, another shutdown is a loser.
Be glad Dems didnt demand even more.
Not all user fees are the same. If you are paying for a fee for a service that actually provides you some value, maybe. If it’s a fee for a “service” you are required by law to purchase whether you want to or not, this is surtax.
Isn't that what I'm supposedly paying taxes for?
As Levin points out, the cuts to come later are through entitlement reform. It will take a positive act to reverse them. Usually, cuts to come later are in discretionary spending, which takes a positive act in the future.
And I have no doubt that both sides would take the positive acts necessary to do this. They are doing it now with the sequester cuts, why wouldn't they do it in the future?
“I like it because a government shutdown would only hurt Republicans more and make Obama and Democrats come out smelling like roses.”
I don’t understand this mentality that the GOP MUST avoid a shutdown at all costs. By definition, this puts us in a weakened position with any negotiation, which is why we end up with such a horrible deal.
With the president’s poll numbers at their lowest point ever, and his credibility all but lost with the American people, Repubs are not the ones that should be cowering in the corner trying to avoid a fight. If they’re not willing to fight under these conditions, when will they ever?
No, the House leadership promised only 6 weeks ago not to worry about abandoning the Obamacare fight, because they would ABSOLUTELY hold the line on sequester-level cuts. Now, they are all too willing to break these promises and throw away the one bit of fiscal restraint we’ve had in recent years.
With trillion dollar annual deficits, we should be fighting for DEEPER cuts than the sequester levels, and should never even consider accepting a dollar more. But of course, that would require a leadership that actually believed in reducing spending. And we haven’t had that since Newt was in charge.
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