“Budget Deal” is Progress, but Not an Appropriation

by Tim Larkins, Director, Market Intelligence

As you may have heard, John Boehner is trying to push a fiscal agreement through Congress before his tenure as Speaker of the House is over.

While this is progress, it’s important to remember that this “budget deal” is not an appropriation – meaning it does not fund agencies in FY16.  The end result here would be similar to what we experienced in 2013 with the BBA (Bipartisan Budget Act) in that it will raise the debt ceiling through March of 2017 and it will lift spending caps (thereby avoiding sequestration) by roughly $50 billion in FY16 , $30 billion in FY17, and it will allow for an additional $32 billion in OCO (overseas contingency operations) funding between FY16 and FY17.  On a side note – the increase in allowance could be offset by cuts to Medicare, changes to the crop insurance program, and offsetting oil sales from the Petroleum Reserve, among other things.

But in order for this to have an impact, we still would need an appropriations package from Congress to fund the agencies.  If this deal passes (and assuming the President gets his wish in splitting the $50 billion this year equitably between DOD and Civilian agencies) it will be easier for lawmakers to work together to create an appropriations package (most likely in the form of an omnibus) by the time the continuing resolution (CR) expires in December.
Increasing the debt ceiling, raising discretionary spending caps, and setting the table for an omnibus is excellent news for industry, as most analysts assumed the government would be operating on CRs for the remainder of the year.  There is still much work to be done, but at this point, a little bit of optimism would not be unwarranted.