CBO has released a cost estimate for the new Bipartisan Budget Act hammered out between outgoing House Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Harry Reid, and the Obama Administration. The bill would suspend the debt ceiling through March 15, 2017 -- well after the 2016 election. (As we noted earlier, allowing the debt to pile up will increase mandatory net interest payments.)
In addition, the Act would raise the Budget Control Act's spending caps for the next two years and includes reforms, revenues, and one major gimmick to "pay for" the spending hikes. As the chart below shows, the spending is front loaded, while the cuts are back loaded.
Spending caps for the next two fiscal years would be raised, split between security and non-security categories, leading to an increase in spending by $67 billion over the next two years, and $90 billion through 2021.
It also would implement a number of savings in direct spending and offsetting receipts, including:
- Establishing an 8.9 percent cap on the overall rate of return for federal crop insurance providers. Currently, the negotiated overall rate of return is around 14.5 percent: $800 million over five years, $3 billion over ten.
- Drawing down inventory from and making other changes to the Strategic Petroleum Reserve: $1.2 billion over five years, $5.1 billion over ten years.
- Reforming the Pension Benefit Guaranty Corporation including an increase in single-employer premium payments and changing the premium payment due date starting in 2025: $1.3 billion over five years, and $6.5 billion over ten.
- Changes to Medicare, including modifying Part B premiums, increasing the "rebate" payment from drug manufacturers who participate in Medicaid: $1.2 billion over five years, and $6.2 billion over ten.
- Rescinding and permanently cancelling funding from the Crimes Victims Fund and the Asset Forfeiture Fund: $2.2 billion over five years.
- Implementing the Social Security Benefit Protection and Opportunity Enhancement Act to reduce fraud and abuse from the Disability Insurance Trust Fund, as well as other Social Security related reforms: $540 million over five years, $4.4 billion over ten.
- Requiring that certain spectrum be auctioned no later than 2024, which would generate offsetting receipts, but outlays from the Spectrum Relocation Fund would also be increased: cost of $480 million over five, savings of $2.8 billion over ten.
There is one additional item -- the largest savings in the package -- to modify some sequester and budget enforcement mechanisms. CBO estimates that this would result in a one-year savings of $19.8 billion ... in 2025. So the sequester would be eased now, and re-tightened much later.
On a per year basis as seen the chart below, the discretionary changes would boost spending by $15 billion (averaged over six years) while the net impact of the direct spending provisions would reduce outlays by $4.6 billion annually (over ten years) -- excluding the budget enforcement and FY 2025 gimmick, by $3.2 billion per year.