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Budget Deal: Negotiators Agree to Level of Cuts, Still a Ways to Go on Everything Else

The only deal that has been reached to fund the government for the rest of the year is on the level of cuts below the 2010 baseline. The continuing resolution, if passed, would have an additional $23 billion in cuts, on top of the $10 billion already enacted by two previous short-term stopgaps.

This was certainly the first sticking point, so it’s fair to call this a breakthrough. But here’s what is yet to be decided: where the cuts will come from, whether it will draw from just the discretionary budget or dip into the mandatory spending, what policy riders will or will not get attached to the bill, and most important, what collection of 218 House members and 60 Senators will vote for it. And they have nine days and counting, actually less if you contend that lawmakers must have 72 hours’ notice to look at a final bill. So working off the same number is a step forward, but the question will be whether this deal, in its final form, can be sold to either caucus.

Joe Biden met with Senate Democrats last night to work on that side of the caucus. On the specifics, the House and Senate Appropriations Committees are meeting to make that determination of what cuts go where.

Then the conversation must turn to the policy riders. Many members of the House GOP want specific policy changes stuck to the continuing resolution. While previously the White House and Senate Democrats said they wanted a clean bill, Vice President Biden conceded that some riders will probably wind up in the finished product. The assumption on the Hill was that more “minor” policy changes would make it in, with the more controversial stuff out, but that’s not what this sounds like:

A Democratic lawmaker familiar with a meeting Wednesday between Obama and members of the Congressional Black Caucus said the administration made it clear that some House GOP proposals restricting the Environmental Protection Agency’s regulatory powers would have to make it into the final bill. In order to characterize the White House’s position, the lawmaker insisted on anonymity because the meeting was private.

It’s not clear which proposals the White House might accept, but those backed by Republicans would block the government from carrying out regulations on greenhouse gases, putting in place a plan to clean up the Chesapeake Bay and from shutting down mountaintop mines it believes will cause too much water pollution.

Even if this weren’t true – and there are conflicting reports, despite lots of worries Dem staffers – the larger point is that there are no “minor” policy riders, in all likelihood. A rider blocking cleanup of the Chesapeake may be “minor” in the sense that nobody has collected a million petitions against it or made it a headline on cable news, but to people who live on Maryland’s Eastern Shore, that matters a great deal.

Paul Kane casually mentions that “If approved, the deal would be the largest single-year budget cut in U.S. history.” Given all the headwinds in the economy and the fragile nature of the recovery, this is about the worst year to enact such a thing. $33 billion in cuts comes directly out of whatever stimulus that was in the tax cut deal. I tallied everything in that deal other than extension of current law to be about $110 billion. So this knocks that down by 30%, and oil prices do a lot of the rest of the work. Not only is that tax cut stimulus mostly gone in the near term, then, but there’s no chance to give the economy the additional stimulus is needs to fill the output gap and get people back to work. And the Fed has little stomach for any more unconventional monetary policy beyond what it’s doing currently, which isn’t enough.

Growth forecasts have already backed up. The deliberate sabotage of the economy by Congress and the White House in this deal won’t help.

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David Dayen

David Dayen