Sequestration & the Ryan-Murray Budget Deal
Well this looks like some good news coming out of Washington for a change. Congress has put together a budget proposal that will help keep the government running for the next 2 years and soften the blow of sequestration. This, of course, assumes that both houses can come to agreement and the President doesn't veto the bill. I think none of those things will happen and we will get a budget bill to pass.
So why will this "soften" the sequestration issue? Well the proposed deal would allow for $2.7 Billion more spending for defense than the current law. It would also allow for $27.3 Billion more spending in non-defense areas. This means that the government will be "buying back" about 40% of the sequestration cuts for defense and about 60% of the sequestration cuts for non-defense spending. While this is higher than the current sequestration caps, it is below the original budget requests by both the President and Congress. I think what is exciting is that sounds like a compromise and that word has been sorely missing from our government of late.
But where is this "extra" money going to come from? It sounds like there will have to be some decisions made about specific programs that might get cut and/or eliminated. This is opposed to the sequestration method where everything is cut by a certain amount. There are also ways of paying for this with future reductions. This may work unless the interest rates rise significantly in the future. There are also some fees that will go into effect to help raise money (supposedly taxes won't increase). The fee that caught my attention is a fee for airline travel. The fee is specifically for budget reduction and will not help the Department of Homeland security or the FAA directly. So this is a tax of sorts, just on airline travel.
While this compromise is not a significant dent in the budget or the federal deficit, it is a sign the government is working together. Both political parties are praising this as a good first step. We need to hold our leaders accountable for continued work in this area and make sure we don't end up with another impasse or government shutdown. This is encouraging, and for government contractors it means a more stable budget environment. This stability should allow the government procurement system to better plan and execute the contracts they need to run the government. The uncertainty that has plagued the system for several years should go away and we should return to a more normal way of doing business. This should bode well for government contractors for 2014. Happy New Year indeed!