Congress approved a federal budget agreement Friday that establishes spending caps for the next two fiscal years and suspends the debt ceiling limit through March 2017.
By finalizing the Bipartisan Budget Act of 2015, Congress averts two upcoming deadlines. The government was scheduled to reach its borrowing limit — or debt ceiling — by November 3, which would have triggered a debate about raising the limit to avoid a default on debt. Congress was also facing a December 11 deadline to reach a budget agreement in order to continue funding the government and avoid a shutdown.
The budget agreement boosts government funding by $80 billion over the next two years. Under the deal, additional spending for defense and non-defense programs would be offset by spending cuts and revenue increases.
Here are some of the budget’s key elements:
- The debt ceiling limit is extended through March 2017.
- New budgetary spending caps are established for the next two fiscal years (through the end of September 2017).
- Federal spending limits established in 2011 through the Budget Control Act are raised by approximately $80 billion. Additional funds are to be allocated equally to defense and non-defense discretionary spending.
- Certain entitlement benefits, such as payments under the Social Security disability program, are restructured, which will result in some modest budget savings. At the same time, the deal would shift payroll tax revenue to keep the program solvent until 2022. The disability program was expected to run out of money next year, resulting in a 20% reduction in benefits.
- The deal includes a provision to prevent a significant increase, slated for 2016, in Medicare Part B premiums. (For example, for most recipients the current premium is $104.50 per month, which would have increased to $159.30 per month without this provision.)
- Some savings are generated from Medicare by equalizing payments among hospitals and providers.
- Procedures for claiming Social Security and disability benefits are also amended.
- The automatic enrollment requirement under the Affordable Care Act for employers with more than 200 employees is repealed.
The Congressional Budget Office issued an updated report late Tuesday stating that the costs of the budget were fully offset.
Resolving the debt ceiling question and federal budget eliminates uncertainty around these issues, which, in the past, has resulted in market volatility.