News Column

The Budget Agreement: White Smoke in D.C.

December 17, 2013

Isaac Cohen --

u.s. capitol
U.S. Capitol (file photo)

After years of intense haggling and spectacular posturing in Washington, Republicans and Democrats reached a bipartisan agreement on the U.S. federal budget that has already passed the House and seems likely to pass the Senate as soon as Wednesday.

Negotiations were low key and devoid of dramatic gestures, but the result was limited and partial. In simpler terms, the agreement does not cover "the whole enchilada."

One of the main reasons was precisely that the negotiators, led by Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash., focused on a limited and therefore viable agreement.

As a result, federal government spending will increase by $63 billion over the next two years, while the budget deficit will be reduced by $22.5 billion during the next 10 years. Some fees for services will increase, such as those for airport security, which will be translated into increases in the cost of airline tickets.

Additionally, the contribution by newly hired federal workers and the military to their pensions will increase from 0.8 to 1.3 percent.

However, the main accomplishment is that, for the next two years, it will be impossible to threaten the shutdown of the federal government. As described by Ms. Murray, the uncertainty caused by the threats to shutdown the government was "devastating for our fragile economic recovery."

Many issues were left out, such as extending unemployment benefits for the long-term unemployed, or changes in social programs such as Medicare or Social Security.

But, as Mr. Ryan said, "in divided government you don't always get what you want."


Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director, UNECLAC Washington Office.

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