Budget deal is struck

Washington - House and Senate negotiators unveiled an $85 billion agreement late Tuesday to fund federal agencies through the fall of 2015, avoiding another government shutdown and ending the cycle of crisis that has paralyzed Washington for much of the past three years.

In a rare display of bipartisan cooperation, House Budget Committee chairman Paul Ryan, R-Wis., stood side-by-side in the Capitol with Senate Budget Committee chairman Patty Murray, D-Wash., to announce the deal, which would cancel half the sharp spending cuts known as the sequester for the current fiscal year.

Ryan called the agreement "a clear improvement on the status quo" that protects the Pentagon from fresh cuts set to hit January while trimming deficits by more than $20 billion over the next decade.

With the deal already under fire from conservatives for weakening the sequester, Ryan acknowledged that the package is not ideal. But in a "divided government" where Democrats control the White House and the Senate, he said, "I deal with the way things are, not the way I necessarily want them to be."

The deal would not deliver a key demand of many Democrats to extend unemployment insurance for the long-term unemployed. While they pledged to keep fighting, senior Democrats acknowledged that checks are likely to be cut off at the end of the month for more than a million jobless workers, undercutting the strengthening economic recovery.

But the agreement is forecast to provide an offsetting boost to the economy by returning a degree of normalcy to the Washington budget process and sparking hope that Republicans and Democrats are finally figuring out how to work together after years of destabilizing strife.

The agreement would set the budget for the Pentagon and other federal agencies at $1.012 trillion for fiscal 2014, reversing a two-year slide in agency spending. The Pentagon would get a $2 billion increase over last year, while domestic agencies would get a $22 billion bump, clearing space for such administration priorities as fresh investments in education and infrastructure.

For fiscal 2015, spending would increase only slightly, to $1.014 trillion, for a total of $63 billion in sequester replacement.

The cost would be covered through a mix of policies to be implemented over the next decade, roughly half spending cuts and half new non-tax revenues. They include $12.6 billion in higher security fees for airline passengers, $8 billion in higher fees for federal insurance of private pensions, $6 billion in reduced payments to student-loan debt collectors and $3 billion saved by not completely refilling the nation's strategic petroleum reserves.

Another large chunk of savings-$12 billion over the next decade-would come from reduced contributions to federal pensions, split evenly between military retirees and new civilian workers who start after Jan. 1.

For those in the military, the reduction would take the form of lower cost-of-living increases for retirees between the ages of 40 and 62, many of whom take other jobs while collecting their military pensions. New civilian workers, meanwhile, will be required to contribute an additional 1.3 percent to their own retirements.

Current federal workers would not be affected, said Rep. Chris Van Hollen, D-Md., the lead budget negotiator for House Democrats. The impact on pensions, one of the last major issues to be decided, was hammered out during an intense weekend of talks between Van Hollen and Murray, who persuaded Ryan to spread the pain to the youngest military retirees.

"The agreement's not perfect, but it's better than none at all," Van Hollen said, adding that it "replaces part of the job-killing sequester without disproportionately hitting middle-class families, including hundreds of thousands of hard-working public servants."

In addition to replacing part of the sequester for two years, the deal calls for another $22 billion in deficit reduction by extending a small part of the sequester into 2022 and 2023. That shift would primarily affect Medicare providers, who would face an additional two years of 2 percent across-the-board cuts.

Ryan and Murray were rushing to file legislation to codify the deal by midnight Tuesday to clear the way for the House to stage a vote as soon as Thursday and leave town for the year by this weekend. The Senate would vote before leaving town next week.



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