No $85B budget deal, negotiators say

Proposals being circulated outlining a possible budget deal framework to replace the sequester have not been agreed to, the offices of Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.) said Friday.

{mosads}Sources had said the leaders of the House-Senate budget conference committee are seeking a path to an approximately $85 billion budget deal over the Thanksgiving break. The deal would harvest low-hanging fruit from previous budget talks and replace some automatic sequester cuts.

But Murray spokesman Eli Zupnick and Ryan spokesman William Allison said that even describing the proposals as a tentative deal is “false.”

“Talks continue and Murray remains hopeful that they can reach a deal, but there is no framework or deal that has been reached,” Zupnick said. 

The elements of a deal being bandied about Capitol Hill and K Street hail from previous budget talks, are relatively non-controversial and very well could end up in the deal. 

According to the circulating proposal, a deal could replace $65 billion in sequester cuts over two years, leaving most of the $91 billion per year cuts in place. The restored spending could be split between the Pentagon and non-defense programs. 

Not only would a January shutdown be avoided, but fiscal 2015 would be settled as well, opening up the chance for 12 regular appropriations bills to be passed by next Oct. 1.

But as laid out, a $30 billion gap remains in offsets that Democrats were said to be continuing to try to fill with tax revenue increases gained by closing loopholes. Republicans were said to be pushing back on that.

To pay for this sequester replacement and to get $20 billion in addition to deficit reduction, the negotiators are said to be looking at U.S. Postal Service reform but not at including farm bill savings that Speaker John Boehner (R-Ohio) has argued is happening anyway and should not be counted.

Ryan and Murray were also said to be considering adopting $20 billion in savings from the Federal Employee Retirement System (FERS). President Obama in April proposed increasing the federal employee contribution by 1.2 percentage points to generate this amount of savings.

The list of tentative offsets at this point does not include taxes or big entitlement changes, although changes to the military’s Tricare drug program have been on the table during some discussions.  

The contemplated deal could contemplate extending cuts to disproportionate share hospital (DSH) payments made in ObamaCare to get up to $4 billion in savings, according to sources. 

The cuts already in place are controversial with hospitals. The Supreme Court’s ObamaCare decision ended up reducing the expansion of Medicaid. DSH payments are made to hospitals that care for the uninsured, and hospitals got cut even though the number of uninsured is remaining high in states that now opt not to expand Medicaid. 

Non-tax revenue appears to be possible in the deal at this point, including $11 billion in higher aviation fees, likely from applying fees to each leg of a multiple-connection flight, and an estimated $20 billion from sale of wireless spectrum. 

Several analysts said this figure could be rosy because the Obama budget only saw $5 billion coming from such sales. 

There are several candidates that could fill the $30 billion gap in the framework, budget experts said. A quick one could be throwing the farm bill into the mix if farm bill negotiators can reach a deal before Ryan and Murray’s deadline of Dec. 13.

Another could be allowing the troubled Pension Benefit Guaranty Corporation, which backs private pensions, to charge companies and unions higher premiums. The PBGC reported a nearly $36 billion total deficit last week. 

Another change could be higher means testing for Medicare, which was included in the president’s budget. The advantage of higher premiums for the wealthy is that Democrats can call it higher revenue and Republicans can call it entitlement reform. 

Each of the proposals in the possible deal being sketched out could alienate some members of both parities and could make the deal hard to pass. 

The Alaska delegation is especially against aviation fees, and members from the Washington metro area are most likely to oppose new cuts to federal worker benefits. 

Postal reform — such as closing facilities, ending Saturday mail and curtailing some worker benefits —  is a political minefield. Congress has been unable to pass a reform bill for years despite USPS losing some $26 billion over the last several years.

A small deal also risks alienating defense hawks and liberals who want to see more of the sequester ended. Under the deal, two-thirds of the $90 billion discretionary sequester in 2014 and 2015 would be kept in place. 

And $20 billion in new deficit reduction could alienate some deficit hawks.  

“This is a minimalist deal using very low hanging fruit,” said Bob Bixby, of The Concord Coalition. “People just don’t seem to be ready to confront the bigger issues.”

He noted that at least a federal government shutdown would be avoided, however, and that Congress could get back to regular appropriations bills.

This story was originally post at 2:40 p.m. and has been updated. 

Tags Boehner Budget John Boehner Patty Murray Paul Ryan

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