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A Two-Year Budget Deal

Wednesday December 11th, 2013   •   Posted by Craig Eyermann at 6:12am PST   •  

Obama Budget As we expected, the chairs of the House and Senate budget committees, Paul Ryan and Patty Murray, reached a deal in setting the amount of federal government spending for the next two years. The Washington Post reports on the particulars:

Under the terms of the deal, spending for the Pentagon and other federal agencies would be set at $1.012 trillion for fiscal 2014, midway between the $1.058 trillion sought by Democrats and the $967 billion championed by Republicans. The Pentagon would get a $2 billion increase over last year, while domestic agencies would get a $22 billion bump, clearing space for administration priorities such as fresh investments in education and infrastructure.

For fiscal 2015, spending would increase only slightly, to $1.014 trillion, for a total of $63 billion in sequester replacement.

That cost would be covered through a mix of policies to be implemented over the next decade. They include $12.6 billion in higher security fees for airline passengers, $8 billion in higher premiums for federal insurance for private pensions, $6 billion in reduced payments to student-loan debt collectors and $3 billion saved by not completely refilling the nation’s strategic petroleum reserves.

Another large chunk of savings — $12 billion over the next decade — would come from reduced contributions to federal pensions, split evenly between military retirees and new civilian workers who start after Dec. 31.

For those in the military, the reduction would take the form of lower cost-of-living increases for retirees between the ages of 40 and 62, many of whom take other jobs while collecting their military pensions. New civilian workers, meanwhile, would be required to contribute an additional 1.3 percent to their retirements.

What’s important to recognize in this spending deal is that it applies to only the discretionary portion of the U.S. federal government’s budget. Given how previous Congresses have set it up, the funding and spending for so-called “mandatory” programs as Medicaid, Medicare, Social Security, and the Affordable Care Act (aka “Obamacare”) are all effectively on auto-pilot and would not be affected by whether or not a deal for the budget was ever reached. The deal would make it possible for U.S. politicians to instead focus on reforming these mandatory spending programs, particularly the troubled Affordable Care Act, which is presently failing by nearly every measure at every level.

Looking at the numbers, it appears that Ryan and Murray simply split the difference between the House and Senate budget proposals in setting the total level of discretionary spending that will take place during the 2014 fiscal year, which runs through September 30, 2014. It’s really more remarkable that the amount of spending provided through Fiscal Year 2015 is just $2 billion higher, which would be an increase of 0.2% from Fiscal Year 2014’s total of $1,012 billion (or $1.012 trillion, if you prefer).

A lot of the other changes in the proposed deal can be described as nibbling around the edges of the federal government’s real problems in spending — particularly the requirement of the federal government’s new employees to contribute a portion of their income toward funding their pensions. Given what we’ve seen with the role of government employee pensions in driving state and local governments into bankruptcy proceedings, it would be tremendously beneficial for both American citizens and the government’s employees if ALL government employees paid a much more fair share of their incomes toward the costs of their extremely generous retirement benefits.

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December 2013