Economy

Final Major Budget Deal Of The Obama-Boehner Era Forces GOP To Release Social Security Hostages

CREDIT: AP Photo/Carolyn Kaster

House Speaker John Boehner of Ohio, walks to a meeting on Capitol Hill in Washington, Monday, Oct. 26, 2015. Boehner is pressing ahead with one last deal as he heads for the exits, pushing to finalize a far-reaching, two-year budget agreement with President Barack Obama before handing Congress' top job over to Rep. Paul Ryan this week, congressional officials said Monday.

The budget deal struck between Republican congressional leaders and the White House on Monday night would negate a previous GOP ploy to stage a crisis in Social Security funding next year.

The deal will prevent a benefits cut by transferring funds from the main Social Security trust to the Social Security Disability Insurance (SSDI) trust, which would otherwise run short of funding next year and be forced to cut payments to beneficiaries by 20 percent. Congress has used that rudimentary policy solution to the shifting tides of financing between the two Social Security trust funds for decades, but Republicans had moved to block such a transfer back in January in hopes of creating a high-pressure legislative crisis around the disability program.

At the time, Democrats and groups that oppose Social Security cuts objected loudly. The move amounted to taking disability benefits hostage, they said, to create leverage for forcing retirement benefit cuts that could be easily avoided by ditching payroll tax rules that benefit the highest-earning workers. Boehner’s strategic reversal doesn’t give program advocates an outright win, Social Security Works President Nancy Altman said in an interview, but it’s an improvement over a manufactured crisis.

“You’re happy when hostages get released, you’re relieved,” Altman said. “You’re not gonna celebrate just because the ransom wasn’t steeper, but you’re glad it’s something you can afford.”

By abandoning that crisis-creating strategy in Monday’s deal, outgoing Speaker John Boehner (R-OH) hopes to have resolved the last big budget fight of the Obama-Boehner era. If it passes, the bill will raise the nation’s debt limit far enough to push the next showdown over it into 2017. It would finance government operations through the end of Obama’s presidency as well, thus ending a cycle of precarious high-stakes dealmaking that’s gone on since Republicans took over the House in early 2011.

But that’s only if it passes. Conservatives in Boehner’s caucus are already poo-pooing the deal. The outgoing Speaker and his presumptive successor, Rep. Paul Ryan (R-WI), have work to do to stave off a full revolt. Without a deal, America will run out of debt ceiling headroom on November 3 and could face another federal government shutdown closer to the end of the year.

The deal scrounges funds from a variety of places to pay for a $112 billion two-year increase in total spending on the military, domestic programs, and ongoing warzone operations. In exchange for loosening sequestration cuts to military and discretionary spending, the deal extends sequestration cuts to so-called mandatory spending programs through 2025 instead of allowing them to lapse in 2023.

That extension of the sequestration rules will primarily affect Medicare. The deal that created the automated annual cuts included a 2 percent yearly trim to the payments health care providers receive from the program. The budget deal cut at the end of 2013 between Ryan and Sen. Patty Murray (D-WA) extended those cuts from 2021 to 2023, and Monday’s deal tacks on another two years.

It’s a blow to Medicare service providers, but doctors should have an easier time stomaching the extension than in previous years. Back in the spring, Congress finally passed a permanent fix to Medicare’s reimbursements formula after deep-seeded flaws in that algorithm had created a constant threat of unsustainably steep cuts to what doctors could charge Medicare. That permanent “doc fix” moves the program toward a reimbursement model that prioritizes the value and efficacy of the care provided rather than rewarding doctors based on the sheer volume of procedures and appointments they bill.

Changes to SSDI would save about $4 or $5 billion over the next decade without cutting benefits. Much of that savings comes from changing how applications for benefits and benefit renewals are evaluated by administrators and medical professionals. The deal also creates a pilot program to explore solutions to what’s known as the “cash cliff” in SSDI – the blunt rules that revoke a beneficiaries entire check if she earns more than $1,090 from work in a given month. The pilot will test different sliding-scale approaches to adjusting disability benefits downward when recipients find paying work.

Some of the deal’s other spending cuts will likely be overshadowed by the changes to safety net programs. It would sell off about 8 percent of the nation’s Strategic Petroleum Reserves, for example, bringing in a small one-time revenue jolt with global oil prices currently sitting at about half their 2014 levels.

Another less-discussed provision would cap profits for insurers from the federal crop insurance system, saving close to $5 billion over ten years. That industry has had a tough couple of years thanks to severe drought around America’s farm country, but historically insurers have gotten a very generous deal from the system. If Monday’s bill is adopted, their agreements with the federal government would all have to be renegotiated by the end of 2016 with far less favorable terms that would still allow significant profit in all but the most disastrous years for farming. It’s a small version of a more sweeping change to crop insurance that the White House has wanted for some time, but which didn’t survive a years-long fight to renew the Farm Bill.