US budget deal hailed by Obama but slammed by conservatives

WASHINGTON (ICIS)–A new two-year, bipartisan US federal budget deal was welcomed by the White House on Wednesday, but the Senate-House agreement came under fire from conservatives and political action groups, suggesting that full congressional approval for the package might not be easy or quick.

The proposed budget deal announced on Tuesday evening by House Budget Committee Chairman Paul Ryan (Republican-Wisconsin) and Senate Budget Committee Chairwoman Patty Murray (Democrat-Washington) would cover federal fiscal years 2014 and 2015 and would raise federal spending for the current fiscal year to $1,012bn (€738.8bn) from the just-ended 2013 fiscal year total of $967bn.

For fiscal year 2015, the budget proposal would raise federal spending slightly higher to $1,013.6bn.

In announcing the compromise budget plan, Ryan said that it would “reduce the deficit without raising taxes, and it cuts spending in a smarter way”.

He said the measure is “a firm step in the right direction, and I ask all my colleagues in the House to support it”.

Murray said that the compromise deal “breaks through the recent dysfunction to prevent another government shutdown and roll back sequestration cuts to defence and domestic investments in a balanced way”.

The “sequestration” cited by Murray was the 2011 Budget Control Act that imposed across-the-board spending cuts totalling nearly $1,000bn over ten years and capped overall federal spending at just under $1,000bn.

But there have been widespread complaints about the resulting arbitrary cuts to defence spending and domestic programmes, and sharp disagreements in Congress on how to move forward led to a 16-day government shutdown in early October.

The resolution of that shutdown requires a new federal budget plan by 15 January. The Ryan-Murray measure is meant to avoid another 11th-hour fiscal crisis by setting spending through fiscal year 2015.

The budget bill would restore some $63bn of the approximate $800bn cut from the federal budget last fiscal year by the sequestration, but it offsets that spending, said Ryan, with “mandatory savings and non-tax revenue totalling approximately $85bn”.

Ryan said that while the plan does not raise income taxes, it does increase certain fees and eliminates some minor federal outlays over the next two years. For example, it reduces the interest rate paid by the federal government to energy companies on the amounts they overpay for oil and gas royalties, saving $750m over 10 years.

In another example, the compromise would raise airline passenger fees from $2 to $5.60 per flight to help support the Transportation Security Administration (TSA).

Although the proposal raises federal spending levels for the current fiscal year and for fiscal year 2015, Ryan said the measure would save $28bn over 10 years.  

President Barack Obama hailed the agreement, saying the bipartisan deal “is a good first step”.

“It’s balanced and includes targeted fee increases and spending cuts designed in a way that doesn’t hurt our economy,” he said.

Obama urged Congress to pass the compromise budget proposal in time to avoid the 15 January deadline and another fiscal crisis.

But the bill drew quick condemnation from Senator Marco Rubio of Florida, one of the leading Senate Republican conservatives.

“This budget continues Washington’s irresponsible budgeting decisions by spending more money than the government takes in and placing additional financial burdens on everyday Americans,” Rubio said.

“In the short run, this budget also cancels earlier spending reductions,” he said, referring to the sequestration cuts.

The proposal also came under fire from major conservative interest groups, with the Heritage Foundation charging that the deal “raises discretionary spending above the bipartisan spending agreement forged in 2011 as part of the Budge Control Act”.

The foundation noted that “spending for defence and non-defence domestic programmes would be raised by $45bn in 2014 and by $18bn in 2015”.

The lobby group also charged that while the budget deal would raise federal spending by $63bn over the next two years, the $28bn in savings promised in the proposal would be realised over the next 10 years, calling the measure “a common Washington gimmick”.

The Tea Party Express, another leading conservative action group, said that “if the sequestration was a baby step forward” toward reducing federal spending, the Ryan-Murray compromise “is a baby step backward”.

“This budget deal creates a faux peace in Washington while burdening taxpayers by sweeping the impending fiscal crisis under the rug,” Tea Party Express chairman Amy Kremer said.

Along with other conservative lobby groups, the Heritage Foundation and the Tea Party Express helped fund the campaigns of many House and Senate Republicans who won sweeping victories in the 2010 mid-term elections. Those newly elected members of Congress will be facing pressure from their backers to oppose the budget deal.

The real challenge for the budget compromise will be in the House, where Republicans hold a solid majority. However, observers suggest that House Speaker John Boehner (Republican-Ohio) could get the measure through the House with enough strong support among minority Democrats to offset any major Republican defections.

A vote on the compromise bill is expected in the House over the next two weeks, perhaps before Congress breaks for the Christmas holidays.

($1 = €0.73)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy