Prospects brighten for small-scale budget deal

WASHINGTON -- Despite the poisonous environment in Congress, chances are improving for a small-scale budget deal next month that would ease automatic spending decreases that threaten to cut more deeply into domestic programs and military priorities in 2014.

Neither party will get its biggest priority -- for Democrats, higher taxes; for Republicans, slowing the exploding cost of retirement programs. But a mutual desire to avert another government shutdown sets the stage for splitting the $91 billion difference between what Senate Democrats and House Republicans want to spend next year on operating budgets of the Pentagon and domestic agencies.

Any deal reached by House Budget Committee chairman Paul Ryan, R-Wis., and his counterpart in the Senate, Patty Murray, could still be rejected by their colleagues. But both profess optimism while working hard to minimize potentially damaging leaks that could derail their efforts. Murray, D-Wash., plans to return to the Capitol the week after Thanksgiving to continue behind-closed-door negotiations even though the Senate will remain on recess.

"Hopefully, we can finish, but we'll see," Murray said as she left the Capitol last week. "I can just say we're working really hard to get an agreement."

Democratic and GOP aides familiar with the talks report progress but say there is no agreement yet. The aides spoke on condition of anonymity because they aren't authorized to talk publicly about the negotiations.

Both Ryan, the 2012 GOP nominee for vice president, and Murray were members of earlier deficit panels that failed to strike large-scale budget deals. This time, they've set their sights considerably lower: a package of deficit savings sufficient to pay for restoring some but not all of the automatic spending cuts triggered by the inability of Congress and the president to follow up on a 2011 deficit-shaving accord.

The automatic cuts known as sequestration require $109 billion in spending cuts every year through fiscal 2021 compared with limits set by the 2011 deal. About $90 billion of those cuts would come from agency budgets set by annual spending bills; the rest comes from cuts to a handful of so-called mandatory programs, including a 2 percent cut in Medicare reimbursements to health care providers. Those Medicare cuts are likely to remain in place.

Ryan and Murray appear to be focusing on proposals left over from Murray's days as co-chairman of the failed 2011 deficit "supercommittee" and earlier efforts by Vice President Joe Biden. Those measures include requiring federal workers to contribute more for their pensions, new security fees on air travel, and higher premiums on companies whose pension plans are insured by the government.

Republicans are holding firm against using money from closing tax loopholes as part of the agreement. New tax revenue from closing loopholes should instead be used to lower tax rates, they say.

Democrats have taken curbs in Social Security cost-of-living increases and higher Medicare premiums on upper-income beneficiaries off the table. Instead, Democrats want to claim savings from repealing much-criticized direct payments that the government makes to farmers whether or not they plant a crop. House Speaker John Boehner, R-Ohio, objects to including any savings from ending that farm subsidy as part of the budget deal.

Ryan has told other Republicans that he thinks Murray will relent on taxes. She'll likely want something in return. Democrats, for instance, have mounted a holiday season campaign to spend $25 billion extend jobless benefits averaging less than $300 a month to the long-term unemployed. Benefits for 1.3 million people expire at the end of December. Those long-term jobless benefits once added up to 73 weeks in federal benefits to the 26 weeks of state benefits for a maximum of 99 weeks. Now, 73 weeks is the maximum allowed, with the nationwide average of 54 weeks.

Aides to Murray and Ryan won't go into details, but their playbook of options is heavily drawn from a roster of so-called non-health mandatory spending that was negotiated at length during the supercommittee talks and an earlier 2011 round of talks led by Vice President Joe Biden and House Majority Leader Eric Cantor, R-Va.

Airlines already are lobbying against a proposal to raise $1 billion a year in new revenue by doubling the transportation security fee on nonstop flights from $2.50 to $5. Hospitals oppose cutting federal payments for hospitals that treat low-income people. And the powerful veterans' lobby is on red alert to oppose cuts in generous medical benefits awarded under the military's Tricare program.

A leading option is for a deal covering the 2014-2015 appropriations cycles. Fully restoring the automatic cuts for both years would require more than $180 billion. Washington's K Street lobbying corridor buzzed last week with emails about a tentative framework less than half that size -- in the $60-70 billion range. Aides on both sides would not confirm their accuracy.

What appears clear is that even with an agreement, agencies will face a money crunch. The hard-fought 2011 budget accord set a cap of $1.058 trillion on day-to-day agency budgets for the 2014 budget year that began Oct. 1. With the automatic spending cuts, the comparable cap for 2013 dropped to $988 billion and would fall further to $967 billion -- if an agreement isn't reached before the Jan. 15 expiration of a temporary funding bill that ended the 16-day partial shutdown of the government last month.

Splitting the difference -- which may be ambitious given the nature of what's under consideration -- would mean non-war, nonemergency spending of about $1.012 trillion for agency operations. By contrast, non-war, nonemergency spending in 2012 registered $1.043 trillion.