The Consolidated Appropriations Act, 2014, Public Law No. 113-76 (Jan. 17, 2014) funds the federal government until September 30, 2014. This legislation followed the groundbreaking Bipartisan Budget Act of 2013, Public Law No. 113-67 (Dec. 26, 2013). Together, these laws reflect a significant departure from the recent past. Normally, the budget agreement sets the boundaries for federal government spending in the upcoming fiscal year and the details are then supplied by the Appropriations Committees. The Bipartisan Budget Act set levels for both FY2014 and FY2015—the period from October 1, 2013 to September 30, 2015. This gives Congress a head start on its spending process for FY2015 and will postpone budget-deficit skirmishes until after the next election. Many important things remain undecided, but it is encouraging that Congress has found some common ground.
During the budget process, the House and Senate decide how much the federal government will spend in an upcoming year. Targets are based on Presidential requests and Congressional committees’ advice about agency needs. Allocations are made to each appropriation subcommittee, and Congress has four or five months to agree on how to spend the allotted money. The President’s role in the process comes from his power to veto appropriations bills.
Without a budget, no appropriations guidelines were set and gridlock ensued. Disagreements over spending cuts, raising revenues and allocating money resulted in stalemate, automatic sequestration cuts, and a government shutdown.
Since that time, both sides have worked out a compromise that spends less than the President requested but more than what originally passed. Here are some thoughts on what the two laws do and what they don’t do:
What the Budget Act and the Consolidated Appropriations Act do—
Prevent another government shutdown. By passing a bill that prescribes spending amounts for the rest of the fiscal year, Congress avoided another shutdown in January. Meet budget targets. The Bipartisan Budget Act set a discretionary spending ceiling of $1. 012 trillion for 2014, and the Consolidated Appropriations Act met that goal. This is $191 billion less that the President requested, but it marks the fourth straight year of reduced government spending. That has not happened for over 60 years. Set spending levels for two years. The Budget Agreement makes it possible for the Appropriations Committees to get an early start on 2015 spending priorities and (hopefully) work out differences ahead of time. Setting budget targets moves the endless budget deficit debate off center stage. Reduce the impact of “sequestration.” Republicans and Democrats agree that sequestration is arbitrary and wasteful. The Budget Agreement reduces sequestration in 2014 and 2015 by $63 billion, postpones portions of those cuts, and finds ways to “pay for” any increased spending. The legislation reflects agencies’ latest priorities with flexibility to make intelligent reductions instead of blind, across-the-board cuts.
What they don’t do—
They don’t end the confrontation. While the 2015 budget targets are set, spending details still matter. Some in Congress do not like certain military reductions, want more domestic spending, or see tax overhaul as a key to reach budget goals. The debt ceiling also must be increased. There are calls to make it contingent on amending the Affordable Care Act or restoring pension increases for working age military retirees. Both sides agree, however, that the debt ceiling debate cannot lead to default. They don’t eliminate all painful cuts. Businesses that have federal contracts or grants and those that depend on state, local, or commercial contracts funded by the federal government should be aware that the Budget Agreement has only scratched the surface of future cuts. Federal agencies (particularly the Defense Department) are going forward with major efforts to identify significant cost savings to address current over-capacity and future budget constraints. The DoD is on track to try and reduce its estimated expenditures by roughly $1 trillion over 10 years. They don’t address long term structural issues. Built in costs—the “structural” costs of programs that will continue to grow—threaten the government’s ability to sustain these programs. The Budget Act and the Consolidated Appropriations Act postpone these long-term challenges, but they have not been eliminated. For example, the Pentagon asserts that it cannot sustain current military benefit packages, but efforts to reduce pensions, lessen food subsidies, and require higher contributions for retiree healthcare have been mostly blocked. They don’t address the question of “revenue.” No tax reform was included to increase revenue and cover costs. The IRS and SEC could arguably help collect revenue and penalties due under current law, but their budgets were cut by $526 million and $324 million, respectively. Routine tax incentives known as “tax extenders” were not renewed but could still come up for debate. The bill mostly relies on “user fees” and deferrals. Examples include the Pensions Benefit Guaranty Corporation, customs user fees, government contractor compensation limits and TSA security service fees.