The House-Senate budget bill is 77-pages of largely modest savings but also salted with a variety of “good government” reforms that could help win votes for passage.
For example, all states would be required to use a Treasury program to crack down on fraud and over-payments in jobless benefits. New restrictions are added to better control access to Social Security data and protect against identity theft—a bipartisan cause in the House championed by conservative Rep. Sam Johnson (R-Texas), as well as Rep. Xavier Becerra (D-Calif.), chairman of his party’s caucus.
And the agreement puts a first-time $487,000 cap on what the government will compensate contractors for the top salaries of their executives. That’s still higher than the president’s own $400,000 salary and what the White House first wanted in a proposal last spring. But it would significantly alter the current system for both defense and non-defense contractors.
Nothing stops big companies, like Lockheed, from still paying their executives more, and it does not impact “fixed-price” contracts where the cost to the government is negotiated up front. But it represents a major first step in drawing a line on executive compensation for “cost-plus” contracts where the government reimburses firms for allowable costs.
Among structural savings, the bill takes a first crack at trimming future cost-of-living increases in military pensions for retirees still in the work force. But on the civilian side, negotiators were forced to again fall back on the timeworn solution of putting the overwhelming burden on new hires.
The result is an ever wider split between federal employees who arrived as little as 13 months apart.
For example, employees hired before 2013 will continue to contribute only .8 percent of their pay. That compares with the 3.1 percent now deducted from pay checks for workers hired during 2013 as the result of an earlier budget deal. And this package creates a third tier under which new hires after this year are expected to contribute 4.4 percent – or more than five times what the vast majority are paying.
Elsewhere in the bill, one of the biggest ticket items is just that: an adjustment in post 9/11 aviation security fees collected from passengers to help cover the cost of the Transportation Security Administration.
Those charges now are $2.50 per boarding with a $5 cap on any one-way trip. The new system would impose a simpler flat one-way trip fee charge and raise the $5 to $5.60 next year, effective July 1, 2014.
That’s still less than President Barack Obama’s 2014 budget had envisioned. And for travelers who are already switching planes and paying $5, it is not a major change.
But business travelers and those who enjoy direct flights today will be impacted—making it a sore point for the airline lobby.
Hospitals are also furious with the fact that the deal offers no relief from future cuts on Medicare providers –and even extends these annual 2 percent reductions into 2022 and 2023.
This last move helps to dress up the package with tens of billions in savings, but at a time when hospital networks are already feeling the impact of health care reform, there is a fear that Congress is not seeing the long term impact of these budget assumptions.
For sure, after October’s shutdown crisis, lawmakers seem most focused on the here-and-now.
The agreement promises real relief from threatened defense cuts next month and restores some promise of stability in the appropriations process for the remainder of this Congress.
Most simply, about $63 billion in savings would be used to build a bridge over the worst of sequestration in 2014 and establish a two-to-three year path in which annual discretionary spending will be held between $1.012 trillion and $1.016 trillion.
Both defense and non-defense accounts would get about $22.4 billion more in 2014 than allowed under sequestration, and there is a more modest $9 billion plus-up in 2015. The new 2014 and 2015 caps then dovetail back to the $1.016 trillion post-sequester cap already set for 2016.
That is still far less than the Budget Control Act once promised and a big drop from the $1.043 trillion level in fiscal 2013 before sequestration last March. But it provides some measure of stability for Defense Department planners and it allows Congress and the White House to make decisions of where best to restore some of the domestic cuts over the past year.
That will require tough bargaining as each side picks its priorities in what now appears to be an almost three-year freeze for the remainder of Obama’s second term.
The House and Senate Appropriations Committees will have to move quickly to try to pull together some 2014 omnibus spending bill in January. No long Christmas holiday is envisioned for staff there. But the biggest present of all for the two committees is they are relevant again.