“On balance, the benefit of having a deal is better than no deal.” Senator Lisa Murkowski (R-Alaska)

In Dickens’ holiday classic three ghosts visit cranky Ebenezer Scrooge on Christmas Eve and he awakens transformed by the experience. Unlike his late colleague Jacob Marley, Scrooge gets a second chance and changes his ways.

In this week’s 2-year budget agreement Congress mimics Scrooge’s redemption. Republicans and democrats have learned their lesson: this fall’s government shutdown drove public disapproval of Congress to historic highs—to over 80% in many polls. Read more.

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Federal Budget Deal: A Christmas Carol

Fri Dec 20, 2013

“On balance, the benefit of having a deal is better than no deal.” Senator Lisa Murkowski (R-Alaska)

In Dickens’ holiday classic three ghosts visit cranky Ebenezer Scrooge on Christmas Eve and he awakens transformed by the experience. Unlike his late colleague Jacob Marley, Scrooge gets a second chance and changes his ways.

In this week’s 2-year budget agreement Congress mimics Scrooge’s redemption. Republicans and democrats have learned their lesson: this fall’s government shutdown drove public disapproval of Congress to historic highs—to over 80% in many polls.

The “Ghost of Christmas Future” is telling senators and representatives that they will be turned out of office next Election Day if they don’t mend their ways and compromise on big issues.

Brokered by democratic senator Patty Murray (WA) and republican representative Paul Ryan (WI), the new budget deal will fund the government for two years, putting another shutdown off the table.

The deal has pluses and minuses:

On the plus side and echoing Senator Murkowski, at least they reached a deal and avoided another shutdown. And HR and payroll professionals won’t have to endure another end-of-year nail-biter about a payroll tax holiday or whether income tax rates will be extended. This year Congress should leave town with no last-minute hysterics.

Another big plus is that the deal is bipartisan. It passed the normally acrimonious House by a vote of 332-94 and the Senate by 64-36.

Finally, the idea of democrats and republicans working together on something, in this case the federal budget, bodes well for the future on issues like immigration, Social Security and taxes.

But the budget deal has its minuses too. First and foremost, it does almost nothing about government deficits or the country’s unsustainable public debt—now over $17 trillion. In fact, the deal lets the debt keep growing.
Second, this is really a very small agreement—federal discretionary spending actually increases from $986 billion in FY 2013 to $1.012 trillion this fiscal year and $1.014 in FY 2015. And the deal addresses neither runaway entitlement spending nor tax revenues.

True, annual government deficits are projected to decrease over ten years, but only by a cumulative $23 billion—a drop in the proverbial bucket. Indeed, the nation’s public debt would keep rising over those ten years since Washington DC would continue to run annual multi-billion deficits.

Taking account of the pluses and minuses, what’s the takeaway?

First, notwithstanding a deep ideological chasm Congress found a way to reach across the aisle and avoid shutting down the government over the federal budget.

Second, think incremental policy change for the next year as opposed to sweeping reform. Congress will be hitting singles, not home runs. Comprehensive immigration reform, for example, is off the table for now. Ditto a “Grand Bargain” of spending and tax reform.

Third, expect a toning down of heated partisan rhetoric on Capitol Hill. To be sure we’ll still have full-throated political debates, but the constant verbal warfare is likely to abate at last.

What would Charles Dickens say about all this? Probably that the budget deal experience, like Ebenezer’s, represents a second chance. The public will be relieved that another nasty shutdown has been averted; but they will remain skeptical that Congress has truly redeemed itself.

Happy Holidays!