The Deal on the Budget

In their lugubrious reaction to the incipient deal on the federal budget, the editors of the Wall Street Journal present the deal as a measured and balanced one:

The Obama Presidency staged a last policy gasp Tuesday, as the White House and congressional leaders completed a budget deal that defers every serious choice to the next Administration. The mutual nonaggression pact is the product of a hyper-polarized Washington, and perhaps the only thing worse than passing it would be not passing it.

The agreement breaks the budget spending caps to add $50 billion to the budget in fiscal year 2016 and $30 billion in FY 2017, split evenly between domestic discretionary programs for Democrats and defense top-ups for GOP hawks (plus $31 billion more in “emergency” war funding outside the caps). This is nominally offset with cuts elsewhere and won’t add to the deficit on paper, but trading immediate spending for future savings that are partly illusory is vintage Beltway subterfuge.

Still, this means the discretionary budget—everything except entitlements—will be $56 billion and $70 billion less, in 2016 and 2017 respectively, than the first Paul Ryan budget that the House passed in 2011. Subsequent versions included deeper cuts. The GOP Congress has strayed from maximalist fiscal restraint, but it has preserved the lower arc of spending that is its most consequential achievement.

before turning their attention to the sop thrown to the budget hawks (if any still exist in Washington):

But Republicans did secure modest entitlement reforms. The deal repeals an ObamaCare mandate for businesses to automatically enroll workers in health benefits, regardless of the cost. It also equalizes the Medicare payment rates for hospital and outpatient care to mitigate losses from providers that game the formula to get paid more for the same services.

Most important, Social Security will get its first upgrade since the 1980s to fix disability insurance. A slack economy and policy expansions under George W. Bush and Mr. Obama have transformed disability from a safety net into a middle-age retirement program and the rolls have exploded. Benefits were scheduled to fall by 20% next year because the program’s “trust fund” is nearly bankrupt.

The reality is that the deal, such as it is, does almost nothing to “fix disability insurance”. Over the period of the last fifteen years outlays under the program have doubled. The reality is that SSDI has become the unemployment insurance of last resort. I don’t have a solid estimate but I believe that there are probably tens or hundreds of thousands of recipients who would prefer to be working over being on the dole and who would work through pain and illness.

The real problem with SSDI is that the number of jobs isn’t growing fast enough and the compensation for the jobs that are being created isn’t keeping up with the cost of living. Those are the problems that are desperately in need of “fixing”. Expect lots of pontificating but not a lot of action over the next year if not forever.