UPDATE: The Senate on Dec. 17, 2013 cleared the way for passage of a bipartisan budget deal, which could come to a full vote later today or on Wednesday.
All hail the new bipartisan budget deal--for now anyway.
Business groups breathed a collective sigh of relief when the House of Representative voted late yesterday to approve a rare bipartisan budget deal that would trim the deficit and forestall potential fiscal fights that have become frustratingly commonplace on Capitol Hill.
The deal, which would last nearly three years, could offer something of a return to the kind of certainty that small businesses value for making short and long-range goals.
While few specifics regarding this budget are known at present, most business groups say they're just happy to have an agreement. "The budget deal at this early stage is, for us, more about the deal itself," says Molly Brogan Day, a spokeswoman for the National Small Business Association, a business advocacy group in Washington, D.C.
In contrast to the brinkmanship that's come to define this Congress, on Tuesday, Rep. Paul Ryan (R., Wisc.) and Sen. Patty Murray (D., Wash.) reached a rare compromise on the budget for the 2014 and 2015 fiscal years. The $85 billion budget deal is expected to cut the deficit by $23 billion by extending cuts to Medicare spending for two additional years.
It would also reverse many across-the-board spending cuts for defense and nondefense discretionary programs, known as sequestration. Spending levels for 2014 are expected to rise from $967 billion to $1.012 trillion and inch up to $1.014 trillion in 2015, from $995 billion. The influx would get divided among departments like transportation and health services--and presumably the Small Business Administration.
How much the SBA would get or not get isn't clear, however. Congress must first offer up an appropriations plan, which should come before Jan. 15. That's when the funding for the government scheduled to run out.
"One of three things could happen," says Shai Akabas, associate director of economic policy for the Bipartisan Policy Center.
1. Congress might pass an omnibus-spending bill where all appropriations are wrapped into one.
2. Pass a funding resolution to keep funding at current levels or bumped up across the board per the new budget deal.
3. The government could shut down.
"Overall, we would expect most of the departments and agencies to have more funding than what they would have had under full sequestration, but it’s hard to know how the allocations will be spelled out," adds Akabas.
Better, but not Ideal
To be sure, this budget deal isn't a categorical win for small business. Among other things, the loss of long-term unemployment benefits could prove challenging for business owners, as many Americans who lose benefits have less to spend on discretionary purchases. And while defense spending should rise as a result of turning back various sequestration cuts, plenty of belt tightening will surely continue--cutting into the bottom lines of some federal contractors.
Further, Day from the NSBA points out that the timing of the House vote so soon before it leaves for its annual holiday break could pose problems down the road, as a host of temporary tax provisions are set to expire Dec. 31. "There are 55 specific tax extenders that need to be addressed but one in particular, Section 179 expensing has been particularly helpful for small businesses," says Day. Businesses can now expense up to $500,000 in capital investments, rather than depreciating them over time. However, as of Jan. 1, 2014 that’s set to revert to just $25,000.
The Senate is expected to take up a vote on the bipartisan budget next week. The President has indicated his support of the measure.