Republicans, White House agree on debt extension until 2017

(Bloomberg) — President Barack Obama and top lawmakers from both parties reached a tentative budget agreement that would avert a U.S. debt default and reduce chances of a government shutdown, easing years of political friction over fiscal policy in Washington.

“It’s going to pass with a bipartisan majority, and I’ll be really happy,” House Speaker John Boehner, who is set to give up his gavel his week to Ways and Means Chairman Paul Ryan, told reporters Tuesday. The House plans to vote Wednesday, a day before the speaker election, Boehner said.

The accord, also praised by Democratic leaders, would extend U.S. borrowing authority until March 2017 and prevent a default as soon as next week. It would include a two-year deal on defense and non-defense spending levels, with details to be worked out later before current funds expire Dec. 11. The plan was posted on the House website Monday night.

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House Appropriations Chairman Hal Rogers of Kentucky said his panel would work “to ensure the appropriations process is complete ahead of the Dec. 11 deadline, so that we can avoid any more delays or ‘shutdown showdowns.’”

The plan was immediately criticized by members of the House Freedom Caucus, a group of about three dozen conservative Republicans who drove Boehner to resign and whose support Ryan sought before he agreed to run for speaker. Boehner plans to use Democratic support to bypass those Republicans’ opposition.

Freedom Caucus

Freedom Caucus member Mo Brooks of Alabama called the accord “financially irresponsible” because it would increase spending by about $80 billion over two years. Two conservative groups, Club for Growth and Heritage Action, announced their opposition in a joint statement that called the agreement a “zombie budget deal.”

Ryan of Wisconsin, who as speaker must try to satisfy all sides of his fractious Republican caucus, said that while he was reserving judgment on the substance of the plan, he opposed the secretive way the agreement was reached.

“I think this process stinks,” Ryan told reporters. “As a conference we should have been meeting months ago to discuss these things, to have a unified strategy going forward.”

Later, Boehner of Ohio said he agreed. “This is not the way to run a railroad.” Still, he added, “When you look at the alternative, it starts to look a whole lot better.”

Additional spending

The administration embraced the deal, saying it would give Obama almost 90 percent of the additional spending he asked for in his budget. Jason Furman, chairman of the White House Council of Economic Advisers, said the agreement achieves the administration’s goals while avoiding cuts to Social Security and Medicare. The additional spending is paid for by measures to ensure hedge funds and private equity companies pay full taxes and it cuts wasteful programs, he said.

In a post on the White House website, Furman said that based on an earlier Congressional Budget Office analysis, the extra spending would create 340,000 more jobs in 2016. The Congressional Budget Office said on Wednesday that it expects about $32 billion in additional government outlays in 2016 from the deal. That would translate to a 0.2 percentage point boost in gross domestic product and about 200,000 additional jobs.

The agreement also was backed by Senate Minority Leader Harry Reid of Nevada and House Minority Leader Nancy Pelosi of California. Support from at least 30 House Republicans would be needed to pass the measure, if all 188 Democrats supported it.

The two-year budget accord lifts separate caps on defense and non-defense spending in equal amounts in fiscal years 2016 and 2017. For 2016, the caps are lifted by $25 billion in each category and in 2017 the caps are lifted by $15 billion.

Obama’s deal

White House officials described President Obama as far more active in the negotiations than he was during 2013 budget talks. Obama began calling congressional leaders from both parties in early September.

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“Unlike in previous budget agreements, this was a process the president and White House was heavily engaged in,” Eric Schultz, an administration spokesman, told reporters aboard Air Force One.

Legislative affairs director Katie Beirne Fallon and presidential adviser Brian Deese were designated as lead negotiators with top congressional staff throughout September and October, according to a person familiar with the process, who asked for anonymity to discuss the talks. Congressional leaders also spoke with White House chief of staff Denis McDonough and Office of Management and Budget Director Shaun Donovan.

Talks progressed well enough that it was determined there was no need for the president to meet face-to-face with congressional leaders. Obama made sure the discussions stayed on track and that Democratic congressional leaders had input, aides said. At one point, Reid publicly complained that his Republican counterpart, Majority Leader Mitch McConnell, had attempted to cut congressional Democrats out of the negotiations.

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