Budget deal is sealed

Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) announced a budget deal Tuesday evening that would call for about $1 trillion in federal spending in 2014 while replacing some sequestration cuts.

The deal replaces $63 billion in sequester cuts over two years and trims an additional $23 billion in long-term deficits.

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The agreement falls far short of the grand budget bargain Speaker John Boehner (R-Ohio) and President Obama once envisioned. But if passed, it will bring a measure of fiscal peace to the capital for the first time since Republicans took control of the House in 2010.

“This deal doesn't solve all of our problems, but I think it is an important step to heal some of the wounds here in Congress,” Murray said in a joint press conference with Ryan at the Capitol.

Ryan, the architect of House Republican budget proposals in recent years, called the agreement “a step in the right direction” and defended the deal as consistent with conservative principles. He noted that it reduced the deficit by $23 billion without raising taxes and said it was the first budget agreement with divided government in Washington since 1986.

“In divided government, you can’t always get what you want,” Ryan said.

The bill, set for a House vote this week, would set overall discretionary spending for the current fiscal year at $1.012 trillion. That is about halfway between the Senate budget level of $1.058 trillion and the House budget level of $967 billion.

Ryan called the proposal “a clear improvement on the status quo.”

Ryan and Murray reached a deal after compromising on federal pension cuts. Instead of the $20 billion in cuts to federal pensions originally in the deal, it now contains $6 billion for federal employees and $6 billion for military retirees. Only employees hired in 2014 or later would be affected by the change.

Federal workers unions also get a win from the deal, which calls for a salary cap of $487,000 on contractor executives.

The offset package also includes increased aviation fees and higher premiums for companies whose pensions are backed by the Pension Benefit Guarantee Corporation.

Another $28 billion in savings is found by extending sequester cuts to Medicare by two years, to 2023.

The deal contained at least one surprise — several energy provisions, including one that could facilitate significant oil and gas drilling revenue from the Gulf of Mexico.

It would approve the U.S.–Mexico Transboundary Agreement and authorize the Interior Department to implement it. The deal is a framework for sharing revenue from oil and gas exploration outside of territorial waters in the Gulf.

The agreement is silent on the issue of extending unemployment insurance despite a last-minute push by Democrats to get that provision in the deal. It also does not contain an increase in the debt ceiling, meaning Congress will likely have to tackle that contentious issue again by the middle of 2014.

Ryan and Murray secured the blessing of their party leaders, and Boehner issued a supportive statement within minutes of their announcement.

Ryan plans to brief the full House Republican Conference on Wednesday morning, and a vote is expected by Friday.

Obama called the agreement “a good first step” and praised it for eliminating the threat of another government shutdown for two years.

“This agreement doesn’t include everything I’d like — and I know many Republicans feel the same way,” Obama said. “That’s the nature of compromise. But it’s a good sign that Democrats and Republicans in Congress were able to come together and break the cycle of short-sighted, crisis-driven decision-making to get this done.”

While the agreement was modest in scope, the image of a conservative Republican standing next to a liberal Democrat to announce a compromise carried more significance, at least symbolically, than the specifics of the deal.

“We have broken through the partisanship and the gridlock,” Murray said.

Yet the bigger looming question is whether Ryan and Murray can push their deal through Congress in the coming days.

House Republicans have repeatedly bucked their leaders on budget deals, and some are likely to argue for bigger spending cuts.

Ryan voiced confidence that it would win “a healthy vote” from House Republicans.

“I have every reason to expect great support from our caucus because we are keeping our principles,” he said.

Leaders are expected to rely on a combination of GOP and Democratic votes, but many Democrats have criticized talk of penalizing federal workers. Others wanted the deal to include the extension of unemployment benefits.

One senior House Democrat told The Hill about an hour before the deal was announced that it would be a “tough sell” in the caucus.

But the agreement secured a quick, if tepid, endorsement from the top House Democrat on the Budget Committee, Rep. Chris Van Hollen (Md.), who had sharply criticized the absence of unemployment insurance and benefits for federal employees, who make up a significant part of his constituency.

“This agreement isn't perfect, but it is certainly better than no agreement at all,” Van Hollen said.

Throughout the afternoon Tuesday, Ryan and Murray shuttled between negotiations and briefings with their respective party leadership.

They largely jettisoned the formal 29-member House-Senate conference committee that was established after the government shutdown in October, hammering out a deal among their staffs.

The closed-door talks sets up a familiar dynamic, with a last-minute deal being unveiled to lawmakers just a few days before they are expected to vote on it. Boehner has been adamant that the House will recess for the year on Friday.

The Senate plans to be in session through next week. With the strong backing of Majority Leader Harry Reid (D-Nev.), Murray should have an easier time winning support from Democrats, but it is unknown how strong a fight Senate Republicans, who had virtually no role in the agreement, will put up.

Within an hour of the deal, Sen. Marco Rubio (R-Fla.) issued a statement announcing his opposition.

Several conservative and Tea Party groups came out against the deal even before it was released, based on reports circulating in the press.

FreedomWorks and Americans for Prosperity on Tuesday joined Heritage Action in criticizing the outlines of the agreement. The first two groups said they would include the votes in their annual lawmaker ratings.

Yet it was unclear how many Republican votes would ultimately be lost on an agreement negotiated by Ryan, a conservative favorite who has more credibility with his party’s right flank than Boehner does.

On the Democratic side, some liberals were worried about the changes to military and federal employee pensions, as well as the lack of an extension of unemployment benefits.

Rep. Gerry Connolly (D-Va.) said he and Rep. Jim Moran (D-Va.) were prepared to vote against any budget deal that included the $20 billion cut in federal pension benefits Republican negotiators had initially urged.

“You put that in there, we're a 'no.' Period,” Connolly said.

Now that Democrats have chiseled that figure down to $6 billion, it’s possible Connolly and other Democrats could be a yes.

“If everything else is copacetic, that's a hold-my-nose 'yes' vote,” he said of the new pension language. “But, again, the devil's in the details, and I've got to see what else is in there.”

The National Treasury Employees Union offered a mixed response to the deal, signaling only soft opposition.

"I am disappointed that the budget deal announced today proposes increases to federal employee retirement contributions for new hires, however, I am glad to see the numbers were significantly reduced from original proposals and that these retirement increases will not impact current employees," NTEU President Colleen Kelley said. 

Mike Lillis contributed.

This story was posted at 6:06 p.m. and updated at 8:08 p.m.