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The Bipartisan Budget Act of 2013 is a Good Deal for Families, Communities, and the Economy
The Senate and House budgets coming in to the conference to be reconciled were radically different not just in the solutions they offered, but also in the challenges each identified as top priorities. The highest priority of the Senate Budget was investing in jobs and the economy by fairly replacing sequestration and making other key investments in future growth. The Senate Budget also continued to reduce the deficit fairly and responsibly in a way that kept the promises we have made to seniors and families and called on the wealthiest Americans and biggest corporations to pay their fair share. The House Budgets highest priority was balancing the budget in ten years and tackling our long-term deficit challenges right away. It did that by making drastic cuts to Medicaid and other programs families and seniors depend on and by restructuring Medicare into a voucher program. At the same time, it called for dramatic tax rate reductions for the wealthiest Americans and biggest corporations, while locking in deepened sequestration for non-defense investments. The Bipartisan Budget Act of 2013 that came out of the budget conference is not everything Democrats would have done on their own, but it aligns with the values and priorities of the Senate Budget, rejects the harmful proposals from the House Budget, and lays a strong foundation for continued work to create jobs and boost the economy. The agreement rolls back sequestration cuts using both spending cuts and new revenue. The Bipartisan Budget Act of 2013 rolls back $63 billion in sequestration cuts scheduled to go into effect in fiscal years 2014 and 2015 and replaces them with a mix of responsible spending cuts and new revenue. Under the agreement, the topline discretionary spending level for fiscal year 2014 would increase to $1.012 trillion, divided between $520 billion in defense spending and $492 billion in non-defense spending. The topline discretionary spending level for fiscal year 2015 would increase to $1.014 trillion, divided between $521 billion in defense and $492 billion in non-defense spending.

Balanced Savings To Roll Back Sequestration In FY14 And FY15

(In billions)

Revenue Defense Savings

$23 $34

Mandatory Savings

$6

*Does not include additional BBA 2013 savings in FY22 and FY23. Defense savings come from defense mandatory spending.

The sequestration replacement consists of $35 billion in new revenue, $6 billion in defense savings, and $22 billion in savings from mandatory programs spread out over the next ten years. The agreement is able to achieve $23 billion in additional deficit reduction because it extends sequestration of certain mandatory programs in fiscal years 2022 and 2023. This deal sets budget levels that are much closer to the Senate Budget than the House Budget. The Bipartisan Budget Act of 2013 maintains defense discretionary spending at roughly current levels and increases nondefense discretionary spending significantly by replacing almost two-thirds of this years cuts. Under the agreement defense investments are protected from the $20 billion cut scheduled to take effect in January, which military leaders and elected officials on both sides agreed would be devastating. At the same time, key domestic investments will move closer to levels set in the Senate Budget.

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In fact, this deal brings defense discretionary spending closer to the level set in both the Senate and House budgets, while bringing non-defense discretionary spending $77 billion above the House level and only $14 billion below the Senate level.
(Fiscal Year 2014, $s in billions)

Non-Defense Comparison
550 525 500 475 450 425 400 2014 House Budget BBA 2013 2014 Senate Budget 414 492 506 550 525 500 475 450 425 400

Defense Comparison

552 520

552

2014 House Budget

BBA 2013

2014 Senate Budget

Percentage of Discretionary Sequestration Replaced In FY14

100.00% 75.00% 50.00% 25.00% 0.00% Non-Defense Defense 61.14% 41.51%

$22.4 Billion In Defense Funding Restored For 2014

525 520 515 510 505 500 495 490 485 FY14 Sequester Levels Bipartisan Budget Act 498 520

Democrats overcame Republican leaders who were fighting to keep sequestration in place. Though many Republicans fought to keep sequestration in place, the Bipartisan Budget Act of 2013 rolls back automatic cuts from sequestration in fiscal years 2014 and 2015 and shows that the remaining years of sequestration will need to be replaced in a balanced way. This deal demonstrates that there is a majority coalition of Democrats and Republicans who want to replace sequestration, so the debate going forward will be about how, not whether, we should replace the remaining years of automatic cuts.

While many Republicans agree with Democrats that sequestration is damaging to both defense and nondefense priorities, others see it as a conservative victory and have pushed for the Budget Control Act sequester caps to be preserved. Some Republicans suggested that their party should bank a win on sequestration, insisted that the debate over

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replacement is in the rearview mirror, and even said a brief postponement of the scheduled cuts would set a precedent, making it virtually impossible to reinstate them later.1 By staying united around the need to replace sequestration and making it one of the focuses of the budget conference, Democrats were able to show that there is bipartisan support for replacing sequestration and that moderate Republicans are willing to buck party leadership to reduce the impacts of the automatic cuts. The Wall Street Journal even called efforts by Republican appropriators and defense advocates to replace sequestration an uprising.2 If sequestration is rolled back for this fiscal year and the next, there will be intense pressure from advocates and from communities across the country to address it in the remaining years, making it even more likely that Republicans who have already supported replacing sequestration will do so again. This deal prevents Band-Aid approaches to dealing with sequestration that would fail to solve the underlying problem of unworkable funding levels. Without the Bipartisan Budget Act of 2013, the alternative almost certainly would be a continuing resolution locking in funding at sequestration levels for the rest of the year. And if the cuts from sequestration are not replaced now, they will be even harder to replace and inadequate fixes for sequestration, like flexibility and smoothing, will be difficult to avoid. Democrats secured a fair replacement and continued the precedent that sequestration cannot be replaced with spending cuts alone. Since sequestration went into effect, Democrats have emphasized the need to fairly replace sequestration with a combination of responsible spending cuts and new revenue. Democrats have also highlighted the need to preserve the 50-50 split between defense and non-defense sequestration (the firewall) and not allow the defense cuts to be fixed without equal solutions on the non-defense side. This budget deal accomplishes both. The deal maintains the principle that sequestration should not be replaced with spending cuts alone and that defense cuts should be replaced with revenue and/or other defense savings. Of the $63 billion in sequestration replaced, $35 billion comes from revenue and $6 billion from other defense savings. Many Republicans fought to eliminate the firewall and pushed ideas that would have only disguised major problems on the defense side and done absolutely nothing to help on the non-defense side.3 But Democrats on the budget conference held strong to make sure the Bipartisan Budget Act of 2013 rolls back sequestration for both defense and non-defense discretionary spending and maintains the critical firewalls that protect non-defense investments now and in the future. Democrats successfully fought off Republican efforts to slash Medicare, Social Security, and Medicaid benefits. Going into the budget conference, Republicans said that their highest priority was cutting Medicare, Social Security, and Medicaid benefits. Many Republicans stated that if sequestration was to be replaced at all, it would have to be entirely with cuts to these programs that seniors and our most vulnerable citizens depend on. Reuters reported that if Democrats are unwilling to offer cuts to benefits programs that make up some two-thirds of federal spending, Republicans are vowing to keep the sequester cuts in place. While Democrats fought to replace more of sequestration in the agreement, Republicans made clear that any additional replacement would require deep cuts to programs Democrats know are critical for struggling seniors and families across the country. There are policy changes in the deal that Democrats would not have done on our own, but we fought against the unfair Republican proposals that would have slashed or made extreme structural changes to programs families and seniors depend onand the bipartisan deal does not cut Medicare, Social Security, or Medicaid benefits by a penny.

1 2

ConservativeHQ.com, 2/26/13, CQ Roll Call, 6/26/13, National Review, 11/27/13. Wall Street Journal,12/3/13. 3 CQ, 11/13/13.

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Republicans refused to close a single wasteful tax loophole in the budget conferencebut Democrats are well-positioned to keep up this fight. Democrats fought to close just a few wasteful tax loopholes that benefit the wealthiest Americans and biggest corporations in the budget conference, but Republicans refused to do a deal unless every single special interest carve-out was protected. Democrats are now, however, on stronger footing than ever when it comes to making the case for closing wasteful, inefficient tax loopholes as part of deficit reduction. The agreement reinforces the Democratic position that fairly addressing our longterm deficit challenges and replacing the rest of sequestration must be done with both responsible spending cuts and new revenue. Republicans came into the budget conference pushing for spending cuts alone, but Bipartisan Budget Act of 2013 includes revenue increases that Grover Norquist called all bad ideas.4 This agreement would pull many Republicans out of their partisan corners to accept some new revenue for sequester relief and deficit reductionand Democrats will continue to make the case for the revenue in upcoming deals to come from the wealthiest Americans and biggest corporations. Also, it is abundantly clear that Democrats are ready to stand strong on this issue when it comes to reforming our bloated tax code in a way that calls on the wealthiest Americans and biggest corporations to pay their fair share. Consistent with the approach in the Senate Budget, this agreement protects the economic recovery by replacing immediate sequestration cuts with more responsible deficit reduction phased in over ten years. Economists across the spectrum say that significant near-term deficit reduction, in particular from sequestration, has negatively impacted the economic recovery and will continue to if sequestration is not replaced. The director of the nonpartisan Congressional Budget Office warned that the faster deficit reduction is phased in, the less time people have to plan and adjust and the worse it is for this current economic recovery.5 To protect the recovery, the Senate Budget replaced sequestration with more responsible deficit reduction phased in over time. In keeping with this approach, the Bipartisan Budget Act of 2013 is structured to support our economy in the near term while putting in place deficit reduction later in the decade. The graphs below show that the conference agreement increases overall discretionary investments in fiscal years 2014 through 2018, with the majority of savings implemented later in the ten year window. If there was no deal and sequestration continued, then all of the cuts would occur in the next two years, which would continue damaging the fragile economic recovery.

Bipartisan Budget Act of 2013 Implements Savings Responsibly

(In billions; excluding debt service)
50 40 30 20 10 0 -10 -20 -30 2014 - 2018 2014 - 2023 -23
Source: CBO

30 20 41 10 Net Impact Of BBA 2013 On Deficits 0 2014 2016 2018 2020 2022 -10 -20
Source: CBO

Net Impact Of BBA 2013 On Deficits Year by Year

-30

4 5

Politico, 11/25/13. Christian Science Monitor, 9/18/13.

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The Bipartisan Budget Act of 2013 finds responsible spending savings and new revenue by putting in place measures to fight waste, fraud, and abuse. To provide relief from sequestration, the agreement finds much of its savings by tackling waste, fraud, and abuse in government programs and by raising revenue through commonsense steps to reduce fraudulently claimed tax refunds. For example: Currently, government contractors can charge the federal government more than $950,000 for federal contractors compensation. This far exceeds the maximum for federal employees salaries, and is even more than double the Presidents salary. The Bipartisan Budget Act of 2013 reigns in excess spending on federal contractors compensation. The agreement includes provisions to help states fight waste in unemployment benefits and a policy to crack down on ID thieves who claim fraudulent tax refunds from the IRS.

Additionally, much of the policy changes in the deal were identified by both Democratic and Republican budgets as responsible ways to reduce the deficit.