Stan Soloway


A gift-wrapped budget for Christmas?

If you asked me two months ago if I thought we would have a budget agreement that relieves a fair portion of sequestration’s impacts and covers both the remainder of the current fiscal year and 2015, I’d have said no.

Until a short while ago, I was convinced that we were stuck with the same top line budget that the House approved ($967 billion in discretionary spending) with the only real issue being the degree of flexibility agencies would be granted to apply the mandated spending reductions.

Fortunately, I was wrong.

The Bipartisan Budget Act of 2013 restores some $60 billion to the budget, including more than $20 billion to the Defense Department. In addition, much to my surprise, the parties agreed on a higher spending level for non-defense agencies than most expected.

For the average American taxpayer who is concerned about the government being able to operate without serious interruption for the next almost two years, the deal is good news. But for federal agencies and contractors, a number of unknowns remain.

 While we get at least a little clarity for the near term, we are far from out of the woods.

There have been and will continue to be any number of analyses of what happened to drive this sudden break out of a disease called “compromise,” but a couple of things are clear.

First, the pain of the October government shutdown is not something either side wants to revisit anytime between now and the 2014 congressional elections. As such, they had to get a deal done that took us through next year.

Second, the budget deal is not a “grand bargain” or even a “mini-bargain.”  It’s a “small ball” agreement that intentionally does not address the big ticket issues -- such as taxes, tax reform and entitlements -- that will need to be settled if a long-term, comprehensive deal is ever to be reached.

In the near term, it appears unlikely that anything will interfere with the budget deal being translated into appropriations bills. There also appears to be agreement in the House and Senate on the agency-by-agency allocations (known as the “302(b)” process).

But the year ahead will not be without fierce debates.

The issues not covered in the current deal remain not only on the table but of significant importance to elements of each party.

For example, one only need look at the House version of the fiscal year 2014 appropriations bill. It is not hard to see where Republicans would significantly reduce spending, particularly in foreign assistance, funding for EPA, the Labor Department, and other agencies that represent the very areas that are among the Democrats’ highest priorities.

Uncertainty at the Defense Department has clearly diminished, since its top line has been defined by the budget agreement. And it is over $20 billion higher than the expected sequestration levels. But questions still remain about force structure, personnel expenditures and more, which will continue to be front and center.

In addition, many of the reductions DoD has proposed to date will likely continue apace.

For example, we expect Defense Secretary Chuck Hagel will continue his previously announced initiative to reduce costs within the office of the secretary, the combatant commands, the joint staff and the defense agencies.  In fact, DOD’s ability to maintain its budget in the out-years may well hinge in large part on its ability to get its internal costs under control, be they with tied to programs, operations and maintenance, or uniformed personnel.

Even among some of DoD’s strongest congressional supporters, this remains an area of tension and debate, and it is almost certain to continue.

Then there is the looming specter of the debt ceiling which will likely again take center stage sometime in the late spring or early summer. Already party leaders are signaling that a real debate is to be expected. And while the budget deal likely precludes the debt debate from impacting near term federal spending, there is no telling at this point what, beyond the obvious, it will impact.

Ironically, the day after passing the budget agreement, the Senate itself engaged in a “Secret Santa” gift exchange. Some gave real gifts, some actually gave coal. Right now, the budget agreement would qualify as the former; and that’s a good start.

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