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December 01, 2013

Two-year budget agreement restores $63 billion in sequestration cuts

A two-year bipartisan budget agreement reached this month for fiscal years 2014 and 2015 would restore $63 billion in sequestration cuts, increase discretionary spending caps, and provide $23 billion in deficit reduction.

The agreement would alter amounts set by the Budget Control Act of 2011, which required automatic across-the-board cuts − known as sequestration − to discretionary spending in January 2013 and required Congress to figure out how to reduce discretionary spending by $109 billion a year for the next eight years to achieve $1.2 trillion in deficit reduction by the year 2021. The mandated across-the-board cuts in fiscal year 2013 required non-defense discretionary programs, including the federal judiciary, to reduce spending by five percent.

The bipartisan agreement reached this month resulted from negotiations required by P.L. 113-46, legislation that ended a two-week government shutdown in October that occurred when Congress could not agree on a temporary funding measure while it continued to work on an omnibus funding measure for fiscal year 2014. The law set a Dec. 13 deadline for a conference committee to develop a bipartisan budget plan. Normally, the annual appropriations–setting process starts with adoption of a budget plan.

House Budget Committee Chairman Paul Ryan (R-Wis.) and Senate Budget Committee Chairman Patty Murray (D-Wash.) led the negotiations, which mark the first time in four years that a budget compromise was reached that is expected to receive the approval of both the House and Senate. The House overwhelmingly passed the legislation, H.J. Res. 59, by a vote of 332-94, and the Senate was expected to clear the measure before the holiday recess.

The $45 billion increase in the Budget Control Act’s discretionary cap for fiscal year 2014 would be divided evenly between defense and non-defense spending, and House and Senate Appropriations Committees face a Jan. 15, 2014, deadline for deciding funding amounts for the remainder of the fiscal year. The cap increase for fiscal year 2015 is set at $18 billion. Under the agreement, the cap increases would be offset in several ways, including a decrease in cost-of-living adjustments for certain military retirees, increased air passenger fees, and increased retirement contributions by future federal employees.

President Obama expressed support for the Ryan-Murray plan. “This agreement replaces a portion of the across-the-board spending cuts known as ‘the sequester’ that have harmed students, seniors, and middle-class families and served as a mindless drag on our economy over the last year,” he said.  Although the agreement does not include everything he would have liked, the president said “that’s the nature of compromise” and called it a “good first step.”

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