BUDGET DECEMBER 11, 2013
The budget deal that Patty Murray and Paul Ryan announced on Tuesday is not certain to pass. But the chances of enactment are relatively good. Republican leaders seem determined to avoid yet another shutdown. The proposal gives both sides something they want, by reducing budget sequestration’s impact on both defense spending (what Republicans want) and non-defense spending (what Democrats want). It offsets these cuts mainly by asking air travelers to pay higher fees and asking federal workers to contribute more to their pensions. Both sides can live with that. And it has the imprimatur of Murray and Ryan, a bipartisan show of support from lawmakers who run the budget committees of their respective chambers.
There are at least two reasons to feel good about this. One is that sanity is creeping back into Washington, ever so slowly and ever so modestly. Budget brinkmanship has been terrible for the economy and, perhaps, even worse for faith in the ability of lawmakers to do their jobs. Responsibility for this lies overwhelmingly with the Republicans, for making the extreme—if ultimately futile—demands that produced a series of crises and shut down the government two months ago. Some Republicans aren’t ready to give up that approach to governing, and they still have the support of groups like Heritage Action. But they may lack the power to block a deal—for the moment, anyway.
The deal also represents sound economic thinking. The immediate goal of economic policy should be to boost employment, which has yet to recover fully from the recession. The long-term goals should be to boost productivity and reduce the deficit. Budget sequestration addresses this in precisely the wrong way. It cuts immediately, but in ways that are ultimately temporary. And it cuts indiscriminately, sometimes from programs like the National Science Foundation and National Institutes of Health that would boost productivity in the long-term. If you're not familiar with the impact, go back and read Sam Stein's great piece on this for the Huffington Post. (Disclosure: My wife, a university professor of engineering, sometimes applies for such grants.) The budget deal scales back these cuts, in effect replacing short-term deficit reduction with long-term deficit reduction.
But if the deal strikes a blow for sound governing and economic policy, it’s a small blow. The only way to construct a deal that could get through this Congress was to keep the stakes small. As Ezra Klein notes, the deal would replace only half of next year’s sequestration cuts—and only a quarter of the following years'. Meanwhile, last year’s cuts remain in place. As Kris Perry, executive director of the First Five Years Fund points out, that means programs like Head Start will remain weaker than they were before sequestration took effect: “While the deal addresses some future impacts of sequestration on Head Start,” Perry says, “it can’t do anything to undo the damage to the 57,000 young children who were deprived of the opportunity to attend a Head Start program due to sequestration.”
The deal also offers no reprieve for the long-term unemployed, since it does not include a new extension of unemployment benefits that both President Obama and congressional Democrats wanted. The current extension expires at the end of the year. More than a million workers would immediately lose benefits, while the long-term unemployment level overall remains disturbingly high. (See the chart below, which comes from the Center on Budget and Policy Priorities.) Even some conservatives agree that renewing those benefits make sense, given the unique, cruel challenge that the long-term unemployed face: The longer they are out of work, the less appealing they seem to prospective employers. But including an extension in the package would have run afoul of Republicans like Rand Paul, who argue that unemployment benefits encourage people to be lazy. The latest research suggests this is mostly wrong: The disincentive to work is tiny, particularly in an economy like this one where jobs are still relatively hard to find. As Matthew O’Brien notes at the Atlantic, “If anything, unemployment benefits have kept people from giving up; remember, you have to be actively looking for a job to qualify for them.”
Congress could always extend benefits separately, just as it could make other investments—like infrastructure projects or pre-kindergarten programs—that would boost the economy while providing immediate, tangible benefits to the public. The prospects for such action seem slim, but, hey, you never know. In the meantime, the agreement announced Tuesday, however modest, is a step in the right direction.