U.S. Budget Deal Softens Sequester, Does Little Else

Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) come with tidings of great joy this week: They have crafted a U.S. budget deal that solves the government's fiscal problems.

Or, not really…

They have cobbled together a U.S. budget deal that lightly papers over the problems of the previous budget deal with savings projected over the next decade.

And the paper job is only good for the next two fiscal years. But it's better than another round of shutdowns and brinkmanship – in the same way that only paying the minimum on your credit card is good for your finances, buying time that lets you promise yourself you'll manage your money better next month.

The deal – officially the "Bipartisan Budget Act of 2013" – would amend the Balanced Budget and Emergency Deficit Control Act of 1985 to fund the government through October 2015. Congress last amended that act with the Budget Control Act of 2011, which introduced us to "sequestration."

Right now, combined security and nonsecurity discretionary spending budget authority – the details that Congress and the president fight over – will be $967.4 billion for 2014, and $995.1 billion for 2015. Under the deal, discretionary spending will go up to $1,012 billion for 2014 and $1,013 billion for 2015.

In other words, the deal creates a softer, gentler sequester that doesn't raise taxes, increases spending, and, according to Ryan, still reduces the deficit.

Here's how they pulled it off…

The Magic of Congressional Accounting

Ryan and Murray have accomplished this feat in much the same way that Congress has always accomplished its budget magic: with tomorrow's money and today's workers.

The 2011 bill required a 2% annual cut in the pay rates for doctors handling Medicare patients. Those cuts originally ended in 2020. The 2013 proposal extends those cuts into 2023, providing tens of billions of dollars in assumed savings.

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Ryan's proposal also calls for an increase in the aviation security fees travelers will pay at the airport. Right now, travelers pay between $2.50 and $5.00, depending on whether they have a connecting flight. This bill would raise that to a flat $5.60 per one-way trip. According to the legislative summary, this will offset TSA's aviation security costs by about 40%.

The final, and probably most typical, source of new revenue is from the federal pension systems for civilian personnel. The 2011 bill required that new civilian hires contribute 3.2% of their gross pay into the Federal Employee Retirement System. This new bill ups that to 4.3% and affects employees who are hired after Dec. 31, 2013, or who were in their position for fewer than five years before the new bill goes into effect.

Due to the arcane vagaries of government budgeting, mandatory contributions are necessary for the pension system. However, more senior civil servants – those hired before 2013 – are only required to contribute 0.8% of their gross salary.

Like Obamacare, the Paul/Murray budget deal forces newer, presumably younger, workers to make up for the waste of the past while expecting nothing from older workers.

The bill still has to pass both houses of Congress. And since the House goes into recess on Dec. 13, they will either do so today, or opposition factions in both parties will have time to derail the process. If that happens, we can expect another round of sound, fury, and nothing.

There are more dire consequences to congressional inaction than higher travel fees and pension contributions. If you think shutdowns are bad, just wait until you're paying $8.00 for a gallon of milk.