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Finding Some Common Ground: Can it Last for the Next Session of Congress?

Introduction

Most of you have already read or heard that Representative Paul Ryan, R. Wisc., and Senator Patty Murray, D, Wash. worked tirelessly to come up with a budget compromise. The Bipartisan Budget Act passed the House and will pass the Senate and become law before adjourning. There was no interest by the conference committee to a long-term grand bargain that could have included reforms to entitlement programs and taxes. The agreement addresses short-term spending or immediate budget needs.

In a nutshell, Ryan said, “It does not raise taxes, and it cuts spending in a smarter way.”

President Obama stated, “This agreement doesn’t include everything I’d like — and I know many Republicans feel the same way. That’s the nature of compromise,” Obama said. “But it’s a good sign that Democrats and Republicans in Congress were able to come together and break the cycle of short-sighted, crisis-driven decision-making to get this done.”

Do not underestimate this herculean task, given the lack bipartisanship that characterized the politically polarized first session of the 113th Congress. Some have called this “the do nothing Congress,” because of the paucity of legislation passed and critical legislative issues left on the table for the next session. When Congress did act, it did so at the last possible moment to reach stopgap agreements on such things as the budget and borrowing limits.

The budget deal ends three years of impasse and fiscal instability (at least for the next two years) in Washington that culminated in October with a partial government shutdown. While the agreement does not permanently end sequestration, it does delay any additional cuts for two years, which allows Congress to find other solutions to deficit and spending reductions, and changes in the tax code.

The House has already adjourned for the year and the Senate does so on Dec. 20.

This piece describes and discusses additional details and the importance of the budget deal, as well as several of the more important pending issues and legislation that will come to the forefront in the first few months of the second session of 113th Congress.

Some of the Deal’s Details

The Bipartisan Budget Act sets discretionary funding levels for 2014 and 2015, replace a portion of sequestration for those years, and modestly reduce 10-year deficit levels. This is a short-term fix avoids a steep cut in Medicare physician payments and another year with very stiff cuts as a result of sequestration.

It provides $45 billion of sequester relief in FY2014 and $18 billion in FY2015, split evenly between defense and non-defense. The agreement sets the discretionary spending level for fiscal year 2014 at $1.012 trillion, and $1.014 trillion in FY 2015. This budget deal does not address the debt ceiling, which must be revisited in February 2014.

The $63 billion of costs will be offset with $85 billion of cuts and user fees over 10 years, including from extending the sequester's mandatory spending cuts through 2023, increasing airline fees, reforming civilian and military retirement programs, reducing various overpayments, increasing PBGC premiums and making various other changes.

On net, the Congressional Budget Office scored the budget package as reducing deficits by about $23 billion through 2023 — though it would produce fewer savings after accounting for interest costs and changes to discretionary accruals. In the second decade, it is projected that the legislation would reduce deficits by something in the order of $100 billion.

At this time, no specific programmatic budget numbers have been provided to indicate what the agreement means for any program including those in education.

What Does This Deal Mean for Education?

Since a top number for government spending is now set, the appropriations process can now get started. The deal restores 87 percent of the sequester cuts to non-defense discretionary spending in FY 2014 which translates to $22.5 billion. Spending in the second year of the agreement is virtually the same. Education is flat-funded in FY 2015 unless some monies are shifted around in the nondefense part of the budget. There still needs to be some negotiations over the Labor-HHS-Education appropriations bill prior to Jan. 15, 2014.

The agreement includes two specific provisions relating to student loans. It ends the special arrangement for non-profit student loan servicers, who are now to be paid through the same appropriation process as the four main servicers. It also lowered the reimbursement for guaranty agencies that rehabilitated loans under the old Federal Family Education Loan Program. This agreement should also reduce any additional damaging cuts to student aid programs.

The deal also suggests a reserve fund for early childhood education. This is an indication to the appropriate committees that the Budget conference felt early learning was an important investment in new resources that needs to be made at the Federal level.

School districts and states will get relief from the ending of the across-the-board sequestration cuts. The five per cent sequestration reductions to education funding will end including those on Impact Aid. Districts receiving these funds have been adversely affected the most.

An Analysis of the Deal

The Committee for a Responsible Federal Budget (CFRB) analysis states, “This package represents an improvement over the status quo since it replaces some of the mindless, upfront, across-the-board sequester cuts with better targeted savings that are both larger and produce additional deficit reduction over the long term. The bill would also set discretionary numbers for this year so appropriators can make the choices necessary to fund the government; this could help the political system to move away from governing by crisis.

However, the legislation will not significantly improve the long-term fiscal situation, and would leave debt on an upward path. Though this bill could be a stepping stone for further reforms, much more will have to be done in order to put the budget on a sustainable path. Policymakers should build on this progress to pass real tax and entitlement reforms that put the debt on a downward path as a share of the economy.”

The Bipartisan Budget Act reduces discretionary sequestration in half in FY2014, by $45 billion. It also reduces the FY2015 sequester by about one-fifth, or $18 billion. The result is budget caps that avoid a $20-billion cut below the current continuing resolution and ease into sequester-level cuts by 2016. In total, the caps allow discretionary spending to rise from $986 billion today to $1,012 billion in FY2014 (as opposed to falling to $967 billion), $1,014 billion in FY2015, and $1,016 billion in FY2016. This increase in spending caps is what has upset many conservative Republicans and has caused the visible and vocal divide in the party.

The CFRB analysis shows that sequester relief is divided exactly equally between defense and non-defense spending. As a result, non-defense spending increases from $468 billion to nearly $492 billion, and then gradually grows to original sequester levels of $493 billion by 2016. Defense spending rises from $518 billion to just above $520 billion, rather than falling to $498 billion as under the sequester. Next year, defense spending would increase to $521 billion before reaching the sequester cap of $523 billion in 2016.

To read the full analysis go to www.newamerica.net and search for the Committee for a Responsible Federal Budget analysis if the budget deal.

Major Issues and Legislation Left on the Table for 2014

The budget deal concluded the first session of the 113th Congress, but many bills and other issues were left incomplete or not even addressed. This means several very important issues will be front and center at the beginning of 113th’s second session. These include debt ceiling, entitlement reform, tax reform, appropriations for FY 2014, Farm Bill, Immigration Reform, extension of unemployment benefits and numerous education bills.

The debt ceiling, since not included in the budget deal, will have to be revisited in February.

On Sunday, Dec. 15, both Ryan and Murray stated on Meet the Press that they believe the next major bipartisan deal in the upcoming session of Congress to be tax reform. Tax reform is always a major undertaking. Leadership on tax reform comes from Senator Max Baucus (Montana) and Representative David Camp (Michigan) and the work has already started. The big question is what will it include — tax and entitled reform?

The Farm bill will be taken up in the first few weeks of January when Congress reconvenes. Time just ran out for a final compromise bill. If they don’t resolve it quickly in 2014, then farm subsidies and other components of the legislation revert to a bill prior to the Depression.

Immigration reform is still up in the air. It will be a mid-term election issue. But one wonders whether there can be an effort to address immigration prior to November. It is needed and many high-profile business leaders continue to lobby for it.

Since the budget deal did not include the extension of employment benefits, Senate Democrats will definitely bring it up in the first few weeks of the next session. This issue is a sticking point for some in the Senate to vote for the budget deal. And this is a sensitive issue and could be an initial divisive issue for the next session.

As a result of the budget deal, FY 2014 appropriations discussions and action can now move forward because spending caps have been finalized for the next two fiscal years.

On the education and workforce side, as much as there is a need for reauthorization of several overdue bills, no one knows if any of these bills will ever come to closure. These include reauthorization of the Elementary and Secondary Education Act (No Child Left Behind), Perkins Act (Career and Technical Education), Higher Education Act, Workforce Investment Act, and Education Sciences Reform Act.

Other issues that are controversial and need to be finalized during the next session include Gainful Employment rule for student aid, and the updating of the E-Rate to meet 21st century needs.

A Big Outstanding Question

Several conservative groups tried to kill the budget deal including FreedomWorks, Heritage Action and Cato Institute. Speaker of the House John Boehner R. Ohio, blasted these and other groups for opposing the deal prior to even reading its contents. Someone characterized his outburst as “getting his Irish up.” The big question — will this division between at least two philosophically different parts of the Republican party continue in the next session, and make it even more difficult to arrive at bipartisan compromises of outstanding issues and bills some of which are described above.

Clearly from statements and votes by those opposed to the budget deal, the divide will continue. But will it dictate what happens in the House? And how difficult it will be to address issues in the Senate is yet to be determined.

Conclusion

While the first session ended on a positive note by passing the Bipartisan Budget Act, there were rifts within both parties due to unhappiness with the Act’s final contents. But one must remember, it is very unusual for everyone to be happy with all parts of a piece of legislation. Will this effort lead to other bipartisan efforts is a question left unanswered? We will have to wait until the next session to find the answer. One can say there was common sense to find common ground, and an understanding of what can be and can’t be done.

Happy holidays to everyone and we can only hope for a better 2014.

Fritz Edelstein is a principal in Public Private Action. His work focuses on strategic government and constituent relations, business development strategy, advocacy research and policy analysis, strategic planning and resource development, and advocacy, outreach and public engagement. This work includes producing Fritzwire, the education Internet newsletter providing timely information on education and related issues. To subscribe, write fritz@publicprivateaction.com.