by Dom Ruscio, Partner
It’s been a roller coaster of a week! Washington’s football team notched its biggest comeback victory in franchise history; Adele dropped her first single in five years; and Paul Ryan was elected Speaker of the House.
And for policy wonks, what better way to end a memorable week than by having President Obama and Congress agree on a budget and debt ceiling deal for the next two years?
The compromise was all but sealed just after 3 am this morning, when the Senate voted 64-35 to pass the Bipartisan Budget Agreement of 2015 (BBA), a measure that was quietly hammered out between the president and congressional leaders over the past few weeks.
In a nutshell, the deal will raise the government’s debt ceiling until March 2017, removing the threat of a national default that was due to occur just a few days from now. It also opens the way for the congressional appropriations committees to complete their work on the 12 spending bills necessary to keep federal programs operating beyond early December.
Much to (almost) everyone’s relief, the BBA sets top-line spending ceilings for both 2016 and 2017 that ease the pressure of spending caps imposed on defense and nondefense programs four years ago. In that regard, the budget agreement would increase discretionary spending by $80 billion above sequester-level spending caps, with the increase split evenly between defense and nondefense programs. Sequester relief of $50 billion would be applied to fiscal year 2016 and $30 billion for fiscal year 2017. The deal also would include additional funds for the Overseas Contingency Operations war account.
As it turns out, the budget agreement more than pays for itself. After some last-minute tweaks made late Tuesday by the House Rules Committee, the Congressional Budget Office (CBO) confirmed that the legislation would reduce the deficit by $79.9 billion over 10 years, more than the $79.4 billion cost of raising the spending caps.
The big offsets? Well, the first one’s a gusher because the deal counts on more than $5.05 billion in revenue from the sale of 58 million barrels of crude oil from the Strategic Petroleum Reserve. (For those of you who don’t have a calculator handy, that’s about $87 per barrel.) The agreement also extends for one year, through fiscal year 2025, the requirement that certain mandatory spending be sequestered each year, including a two percent cut to Medicare providers. According to CBO, that extension would throw off net savings of $14 billion.
As an added benefit for seniors, the budget agreement blocks an estimated 52 percent increase in Medicare Part B premiums next year.
An exciting week indeed.