A bipartisan Budget Conference Committee this week announced a budget deal that caps federal government spending for the next two fiscal years. The plan, which requires approval from the full House and Senate, would also trim $63 billion from automatic spending cuts through sequestration, without the need for taxes.
Although the plan does not address long-term deficit reduction in a meaningful way, it allows the government to avoid another potential shutdown and offers relief from some of the sequestration spending cuts.
Congress seeks additional revenue from fees
The plan — Bipartisan Budget Act of 2013 — provides clarity on discretionary federal spending for the next two fiscal years and would eliminate the threat of another government shutdown through September 2015.
Here are the bill’s main components:
- Discretionary government spending for FY 2014 is targeted at $1.012 trillion. The target is lower than the proposed Senate level of $1.058 trillion and higher than the House budget level of $967 billion.
- Over the next two years, automatic spending cuts through sequestration would be reduced by $63 billion. This amount would be split evenly across defense and discretionary (non-defense) spending programs.
- The reductions in the sequester would be replaced by revenue increases totaling $85 billion, which does not include any additional taxes. Additional revenue would be derived from increases in federal aviation fees, higher contribution requirements for federal employees participating in retirement programs, and higher premiums for private corporations paying into the Pension Benefit Guaranty Corporation (PBGC), and other fees.
The bipartisan committee, formed in the wake of October’s partial government shutdown, reached the agreement earlier than the projected December 13 target date.
Debt ceiling remains unresolved
In the near-term, there are legislative priorities outside of this deal that must be addressed, including the potential extension of emergency unemployment benefits as well as more than 50 tax provisions (referred to as “tax extenders”) set to expire at the end of the year.
The suspension of the debt ceiling ends on February 7, 2014, and will likely have to be formally addressed by mid March to avoid a government debt default.