The White House announced today that it will recommend $56 billion in additional discretionary funding for 2015 above the level contained in the budget deal that Senate Budget Committee Chair Patty Murray and House Budget Committee Chair Paul Ryan negotiated in December. The additional funding, which would be evenly split between defense and non-defense, would be fully offset by cuts in mandatory programs and revenue increases.
The administration's proposal does not undermine the Murray-Ryan deal, but builds on it. The administration's detailed budget proposal will include line-by-line and program-by-program funding levels that fully adhere to the budget agreement's 2015 funding caps, which are now the law. Thus, Congress will have a detailed administration proposal for how to allocate discretionary resources consistent with the budget agreement.
But the president is also outlining his vision of how to improve upon the budget deal, through a proposal that would invest more in areas important to long-term economic growth -- like infrastructure, research, and education -- and pay for those investments through entitlement and tax reforms. He would do so in a way that is consistent with the approach used in the Murray-Ryan agreement, which provided some sequestration relief, offset by a combination of other spending cuts and increased revenues in the form of higher user fees.
The bulk of the sequestration relief in the recent budget agreement comes in 2014. Its sequestration relief for 2015 is very modest, doing little to mitigate sequestration's bite. Under the deal, discretionary funding (adjusted for inflation) will fall in 2015, with funding for non-defense discretionary programs shrinking to 16.6 percent -- or one-sixth -- below the 2010 level in inflation-adjusted dollars (see graph).
The administration's new proposal would provide additional funding for discretionary programs in 2015, while adhering to the framework of the Murray-Ryan deal in key respects. First, it would split sequestration relief evenly between defense and non-defense, reflecting the fact that sequestration applies equally to defense and non-defense programs.
Second, like the Murray-Ryan deal, it offsets the cost of the funding boost with savings over ten years, shifting the deficit reduction to later years when the economy is expected to be stronger -- and when budget cuts should have far less, if any, impact in slowing growth and costing jobs. By replacing appropriations reductions scheduled for 2015 with what would presumably be permanent changes in entitlement programs and the tax code, the proposal would likely increase the long-term deficit reduction. It therefore reflects the judgment, shared by most economists and fiscal policy analysts, that the economy would benefit from less deficit reduction in the near term and more in long run.
The proposal does differ from the Murray-Ryan framework in one noteworthy respect. That agreement included no changes to the tax code; it relied solely on user fees for its revenues. The administration's new proposal, by contrast, would raise some tax revenue by reforming some tax expenditures and closing loopholes. This overcomes a limitation of the Murray-Ryan deal that heavily constrained the sequestration relief it could provide.