Tensions on Capitol Hill Driven by Spending Limits

Two weeks into a government shutdown, and only a few short days from reaching the federal debt ceiling, negotiations between Republicans and Democrats in Congress and the White House have gone nowhere. But the debate is not primarily about defunding or delaying the implementation of the Affordable Care Act (“Obamacare”) anymore. In fact, Democrats seem to have co-opted the fight so they can argue against their greatest nemesis of late: sequestration.

With negotiations in the House of Representatives stalled, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell entered the arena last week to work out a deal. But though the negotiations are allegedly more productive in the Senate than the House, reports suggest they hit a roadblock this week over the spending level at which the government would be funded when it reopens. Democrats are insisting on higher spending levels, even as Senate Republicans have dropped most of their other demands. Meanwhile, Republicans would like to maintain the spending levels set after sequestration last year. (In the interest of full disclosure, Reid has denied that he wants to increase spending levels in this bill. Other Democratic leaders apparently disagree.)

First, some background. (You can find this information and many other details in a New America Foundation issue brief published in April, Federal Education Budget Update: Fiscal Year 2013 Recap and Fiscal Year 2014 Early Analysis.)

Sequestration, as we’ve written before, was the result of a 2011 law, the Budget Control Act (BCA). The BCA required a congressional “supercommittee” to hunt down and pass through Congress $1.5 trillion in deficit reduction over 10 years.

When the supercommittee inevitably failed, though, there was a failsafe in place. $1.2 trillion of that deficit reduction would be guaranteed through spending caps – and to a lesser extent, reductions in non-appropriations, or “mandatory” funding – enforced by sequestration. In fiscal year 2013, discretionary spending was cut midyear from $1.043 trillion overall to $984 billion through a sequester, which amounted to a 5.0 percent cut for most domestic programs, including most federal education programs. And, in fact, the cut should have been deeper (about 8.2 percent), but Congress (Democrats and Republicans) reached a last-minute agreement to push off some of the cuts to the following year. That means in fiscal year 2014, the spending limits is now $966 billion, lower than in 2013, but has not yet been enforced by sequestration.

However, throughout the start of the fiscal year 2014 budget process, the Senate has ignored that spending limit, despite voting for it in early January, arguing that enough deficit reduction has occurred and the harm to key federal programs does not justify the further costs. Instead, the Senate Democrats’ budget appropriated spending at the pre-sequester $1.058 trillion level, and the White House acted similarly to appropriate at $1.057 trillion in its fiscal year 2014 budget.

So what does this all mean for the ongoing shutdown/debt ceiling negotiations?  Well, just as House Speaker John Boehner attempted to make Obamacare his last stand, Senator Reid has apparently made the higher, $1.058 trillion spending limit his last stand.

Both the House Republican and Senate Democratic temporary spending bills, as they were first introduced, continued appropriations at the fiscal year 2013 post-sequester level of about $986 billion. That funding level, however, exceeds the cap in place for 2014 and would trigger a second sequester in 2014, and neither the House or Senate bill included a provision to turn that off, ensuring that the further $18 billion in cuts owed to the Budget Control Act would come automatically in early 2014.

So it’s odd for Senator Reid to now insist on a higher spending level that restores all sequestration cuts – especially given that he didn’t insist on that when the Senate voted to lower the 2014 spending capin early 2013, or when he penned his own continuing appropriations bill a few weeks ago. In effect, this weekend he came out against his own temporary spending bill of a few weeks ago and a “bipartisan compromise” bill that his chamber passed that further reduced spending caps in 2014.

This is all another sign of the tensions in Washington that make any deal difficult. We’ve been writing for months that House Republicans and Senate Democrats are so far apart on spending limits, opportunities for compromise seemed virtually nonexistent. And indeed, those differences in top-level spending amounts have come back to haunt members of Congress in the current debate. Meanwhile, about 500,000 federal employees remain furloughed, along with thousands of contractors; schools and students remain uncertain about their status; Head Start programs are struggling to remain open; federal loans are frozen; and federally funded museums, monuments, and parks are closed.”