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It is not a "grand bargain" budget deal addressing the nation's long-term deficit problems through entitlement and tax policy reforms, but given the environment in Washington, it is a significant achievement.
Preliminary analysis suggests Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis., chairman of their respective budget committees, have proposed a credible two-year spending plan that would avoid another government shutdown.
In the short term at least, it would mitigate the indiscriminate sequestration budget cuts that are damaging worthwhile programs and serving as a drag on the economy, replacing some with targeted spending controls and policy changes that produce long-term savings. Those savings are real, resulting in proposed changes in law, not promises unlikely to be kept.
Most encouraging is that if the House and Senate leadership can transform this deal into legislation, putting in place an actual budget and replacing the crisis-to-crisis approach with normalcy, it will provide a stable foundation on which businesses can build a more vigorous economic recovery.
Signaling the potential economic benefits of the compromise was the immediate drop in stock prices. Wall Street investors seemed to recognize that along with encouraging labor reports, the budget deal could mean the Federal Reserve will begin backing off its easy-money policies, a necessary step in developing a genuine and broad recovery.
Yet dangers remain. As a Wall Street Journal editorial aptly put it, getting the deal passed assumes "enough Republicans refuse to attempt suicide a second time." Congressional observers speculate that a large number of votes from minority House Democrats will be necessary to pass a House budget bill because the Republican caucus will split, with many tea party devotees refusing to give up any of the $967 billion in automatic sequestration budget cuts set for 2014. Some refuse to recognize that the size and random nature of the cuts to defense and domestic programs represents bad policy.
On the Democratic side, the danger lies in a potential demand that Congress include an extension of emergency unemployment benefits to the long-term unemployed, a provision not in the deal. About 2 million people will drop off the rolls in the next several months without a change. Yet Democrats must make that a separate fight. Sen. Murray got them a good ship to navigate to passage. Running it up on the rocks of the unemployment debate would be a tactical blunder.
Discretionary spending would increase to $1.012 trillion in 2014 and $1.014 trillion in 2015. However, in a move that earned Rep. Ryan's backing, it includes long-term cuts in mandatory spending. These steps include reducing the size of benefit increases to veterans tied to inflation, requiring federal workers to pay larger contributions toward pension plans, and ending some sweetheart policies for the oil and gas industry.
On the revenue side, federal airline fees nudge up, which will be passed along to fliers. Most won't notice.
Based on what happens, the biggest political beneficiary may prove to be Rep. Ryan. His approach is a reminder that someone can be true to core fiscal conservative values while recognizing that concessions are necessary to make policy and conduct the business of the people. President Ronald Reagan would recognize the method. While it may earn Rep. Ryan, the GOP's 2012 vice presidential candidate, some gibes from his party's radical right wing, it raises his stature with the vast majority of voters who yearn for politicians who will get things done.