NC Budget and Tax Center

End of government shutdown in sight, sets up chance for big budget deal down the road

As multiple news outlets are reporting, Congress appears poised to secure a deal that re-opens the federal government, allows the US Treasury to pay its bills by lifting the debt limit, and establishes formal talks to develop a long-term strategy for putting our nation’s fiscal house in order. Assuming Congress passes the deal, these new negotiations set up the opportunity for a new approach to the federal budget—one that includes new revenues to support our economy rather than new spending cuts that increase poverty.

The deal itself is straightforward and includes no significant policy concessions to members of the US House of Representative who precipitated the government shutdown as part of efforts to repeal the Affordable Care Act. For details on the deal, see below the fold:

  • The deal re-opens the federal government and provides funding at current levels (about $988 billion for the year) through January 15, 2014. This does maintain the across-the-board sequestration spending cuts that began in 2013.


  • Even more importantly, the deal raises the federal debt limit—the amount the US Treasury can borrow to pay the bills Congress has already racked up—through February 7, 2014.


  • But in a crucial reform, the President—rather than Congress—is given the authority to raise the debt limit prior to February 7. In theory, this will take the possibility of defaulting on our national debt off the table while Congress debates the long-term path forward on the budget.


  • The deal also mandates a bipartisan set of negotiations through a conference committee of members from the House and Senate dedicated to developing a comprehensive deal addressing all aspects of the federal budget, including revenues. The committee is tasked with reporting out this kind of deal by December 13, and will likely face the challenge of how best to replace sequestration with new revenues.


  • The deal also requires that individuals seeking subsidies to buy insurance under the Affordable Care Act be required to prove that their income level makes them eligible for these subsidies. This provision is already a part of current law and so will have no real effect on implementation of the healthcare reform law.

As Congress turns to crafting this comprehensive budget deal, federal policymakers must pursue a more responsible path that looks at new revenues not just spending cuts to resolve our fiscal challenges.  Since 2011, almost three-quarters of debt reduction has come from spending cuts, and as a result, key domestic initiatives like K-12 education, food safety inspections, and research and development are now at the lowest levels as a share of the economy since the 1950s.

Along with the across-the-board sequestration spending cuts set to take effect in January, these cuts have already affected the state’s economic recovery and caused challenges for families, seniors, children and workers in our state. They’ve likely deepened poverty and hardship for the citizens of our state.  This kind of fiscal austerity has cut economic growth in half this year, and will only cause more damage in the future.

And aside from the human and economic cost of more spending cuts, there’s just no pressing fiscal justification. The federal budget deficit has fallen by more than half since 2009, and the long-term deficits have also dropped due to falling healthcare costs.

Instead of embracing additional spending cuts to domestic initiatives that will likely grow poverty, Congress should look at hidden corporate tax code spending as a source for raising new revenues. This is the largest portion of the federal budget and presents the best target for reducing the federal budget deficit over the long term.

Altogether, this deal represents a positive step forward, and although it continues sequestration into 2014, it presents a firm opportunity for replacing future rounds of cuts with additional revenues.


  1. Frances Jenkins

    October 16, 2013 at 8:08 pm

    You forgot the Senate Democrats added a dam before the deal was closed.

  2. Bob Quinn

    October 17, 2013 at 9:18 am

  3. Alan

    October 17, 2013 at 2:44 pm

    I guess Frances must have been watching Faux News where they ‘inadvertently’ labeled a Republican as a Democrat, again. Way to go Frances… keep up the good work, you’re doing a stellar job for the GOP.

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