The bipartisan budget I wrote somewhat favorably about the other day easily cleared an important hurdle today, passing the House by a large majority (332-94).
On the plus side, assuming the Senate approves the deal and both chambers can finish the spending allocation steps that have to occur before January 15—and I’d give those outcomes high odds—we’ll have the first budget, as opposed to “continuing resolution,” in years. And the plan will cancel $63 billion in sequester cuts–$45 billion next year and the rest in 2015–which will help tamp down the fiscal headwinds estimated to have shaved 1.5 percentage points off of growth this year. The “payfors” for this sequester relief are back-loaded in time, so if this goes through, we’ll face a bit less fiscal drag next year.
The deal also signals that another government shutdown is highly unlikely. The Republican leadership is, in fact, quite explicitly and publically scolding the dysfunctionistas (more on that in a moment).
On the downside, the deal fails to extend UI benefits for the long-term unemployed, despite the fact that the share of the long-term unemployed remains highly elevated. In fact, many past UI extensions have been legislated when there were considerably smaller shares of long-termers (see figure here). Note that removing this support before there are enough jobs available for the estimated five million who will lose benefits next year goes in precisely the opposite direction in terms of fiscal support as does the sequester relief.
With one hand, Congress is reducing fiscal drag on next year’s economy; with the other, they’re increasing it. Doesn’t make a lot of sense.
Note also that as part of the plan, the House Republican leadership will extend the “doc fix,” increasing Medicare payments to doctors that were scheduled for a large cut. This juxtaposition of holding harmless doctors’ salaries will stiffing the unemployed did not escape my CBPP colleagues:
House leaders have indicated that they plan to link the budget agreement to a measure to extend relief for three months for physicians from scheduled cuts in the Medicare payment rates that they receive but will not provide a similar reprieve to jobless workers.
Some of the politics of the deal have also been notable. As per the WaPo:
The budget deal appeared to mark a significant shift by House Republicans away from the uncompromising confrontation of recent years fueled by tea party-aligned politicians and outside conservative advocacy groups. After multiple standoffs and threatened defaults and one actual shutdown, polls show that the Republican brand has been badly damaged among voters, and even some of the most conservative Republicans said they were ready for a breather.
A breather or an inflection point? Is this the beginning of a more functional fiscal politics or just the troops coming out of the trenches on Christmas day? I’ll let others hash that out, but there’s an awfully interesting and spicy set of quotes in the WaPo piece wherein Reps Boehner and Ryan tell some of their Tea Party colleagues to grow up.
End of the day, I’m not going to give these guys and gals a Nobel price for partially defusing a fiscal time bomb that they themselves set. But grading on a steep curve, and underscoring the UI omission, I consider this a positive move.