Diving Deeper Into the Budget Conference Agreement

With the details on the agreement reached by Budget Committee chairs Paul Ryan (R-WI) and Patty Murray (D-WA) made fully available yesterday, CRFB has gone deeper into the Balanced Budget Act in a new paper and breaks down the sequester relief, the offsets, and finally the overall effect on the budget this decade and over the long term.

On the discretionary spending and sequester front, we show that the deal will ease the path of spending in the short term to ultimately reach sequester levels in 2016. Rather than spending being reduced by $20 billion come January, discretionary funding will rise by $25 billion. It will then raise very slightly to 2016 levels where it will continue on the current law path. In total, the sequester relief is $63 billion of budget authority, with the deficit impact totaling $62 billion.

The offsets come from a variety of sources, with many smaller policies and a few relatively big one. Some of the more notable offsets include increasing federal employee retirement contributions by 1.3 percentage points to a total of 4.4 percent of wages for employees hired after 2013, reducing the military pension cost-of-living adjustment for working-age retirees, and increasing aviation security fees. These offsets and other changes save $85 billion over ten years, more than the cost of the sequester relief. See the analysis for a full listing and discussion of the offsets.

In terms of debt, the agreement does very little since it includes only small net savings in the first decade, even though those savings grow over time. As you can see below, there is very little change in the CRFB Realistic Baseline assuming that the sequester stays in place. If, however, this deal allows the sequester to be kept in place permanently, it would produce some savings relative to the default Realistic baseline, which assumes the sequester is repealed.

Click here to read the full paper.