Monday, December 09, 2013

Update on "Small Ball" Budget Agreement

by Bill McBride on 12/09/2013 09:27:00 AM

An agreement should be reached this week ...

From Ezra Klein and Evan Soltas at the WaPo: Wonkbook: The ‘Grand Bargain’ is over

The budget deal Patty Murray and Paul Ryan are crafting isn't a "grand bargain." ... But the deal does lift about a third of sequestration's cuts while giving agencies more flexibility to deal with the rest. It does mean the 2014 budget is the work of human hands rather than automatic cuts. It might be a vehicle for Capitol Hill to extend expiring unemployment benefits. And it would be a small but real boost to the economy.

Joel Prakken of Macroeconomic Advisors says the deal "would be a modest boost to GDP growth (relative to sequester). Maybe 1/4 percentage point." Moody's Mark Zandi adds in the possibility of extending unemployment insurance and estimates that "the lift to GDP next year compared to current law is .4. Small, but it matters."
Reducing the sequester budget cuts is good policy.  And it would be good economics (and good overall policy) to extend the emergency unemployment benefits too - but it isn't clear if that will happen.