• Print
  • Default text size A
  • Larger text size A
  • Largest text size A

Budget adopted, debt ceiling debate ahead

Congress adopts 2014 and 2015 U.S. budgets. The debt ceiling must be raised in 2014.

  • By Shahira Knight, vice president of government relations,
  • Fidelity Viewpoints
  • – 12/19/2013
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.

Maybe Congress caught the holiday spirit—or maybe they realized that shutting down the government isn’t in anyone’s best interest. Whatever the reason, Congress did something they haven’t done in several years—they passed a bipartisan two-year budget deal. The budget deal, brokered by Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA), marks a sharp reversal from the gridlock and polarization that led to a 16-day government shutdown just two months earlier. President Obama is expected to sign it into law once it reaches his desk.

The agreement sets government funding levels for the 2014 and 2015 fiscal years. It also relaxes the sequester for the next two fiscal years, so that spending will be a little higher than it otherwise would have been. These higher spending levels are offset by other budgetary savings, so the deficit isn’t negatively impacted over the next 10 years—in fact, the nonpartisan Congressional Budget Office estimates the new law will reduce the deficit by $85 billion over the next 10 years.

Most of the budget savings are noncontroversial, but a few of the provisions garnered some opposition. Most significantly, future military benefits will be reduced, airline user fees will increase to pay for security, and employers with defined benefit pension plans will have to pay higher premiums for their pension insurance.

Here’s what the deal may mean for the next 18 months:

  • It substantially diminishes the risk of another government shutdown in January and over the next 18 months since government funding levels have now been agreed to by both parties.
  • Rather than running the government on autopilot through numerous “continuing resolutions,” the appropriations committees will be able to write bills to determine how government funds should be allocated. They couldn’t do this before, since House Republicans and Senate Democrats were working off different funding numbers.
  • The agreement makes it even less likely Congress will pursue a “grand bargain” on deficit reduction over the next two years. Tax and entitlement reform were already a long shot due to significant policy differences between the two parties. The two-year deal is a sign that lawmakers are now more focused on less ambitious—and more achievable—budget goals.

The budget deal did not raise the debt ceiling, which has been suspended through February 7, 2014. As a result, another contentious debt-ceiling debate might be on the horizon.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
Views expressed are as of December 19, 2013, and may change based on market and other conditions. The opinions provided are those of the speakers and not necessarily those of Fidelity Investments.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
674114.1.0