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Here's why we won't have a government shutdown this year

Something remarkable happened Thursday night. The Senate passed a bill to fund the government.

The bill, known as a "continuing resolution", keeps the federal lights on through December. The bill already passed the House and is expected to be signed by President Obama, preventing a government shutdown. Most news coverage focused on provisions governing the US war against ISIS, but the fact that the bill passed the Senate and House without incident, and that the parties reached a deal to pass it without demanding concessions of each other, is pretty remarkable.

2011, 2012, and 2013 were full of heated spending battles between the White House and House Republicans, resulting in a near-default in 2011 and a 16-day government shutdown last year. 2014 was hardly free of partisan acrimony but it was noticeably lacking in any high-stakes showdown. The parties agreed to disagree, rather than elevating that disagreement into a disaster.

There's still time for Congress to cause a catastrophe; another spending bill will have to pass in December's lame duck session. But given the uneasy peace policymakers have achieved, it's worth examining the specifics of the budget deal. Here are some key points to know.

1) Paul Ryan and Patty Murray's deal held

Ryan, left; Murray, right Alex Wong / Getty

Paul Ryan and Patty Murray, who set the budget framework within which the continuing resolution is operating. (Alex Wong / Getty)

In December 2013, Senate Budget Chair Patty Murray (D-WA) and her House counterpart Paul Ryan (R-WI) worked out a deal to ease the spending caps (and thus the threatened automatic cuts) agreed to in the Budget Control Act (the law that ended the 2011 debt-ceiling crisis). In January 2014, Congress built on that deal by passing the Consolidated Appropriations Act of 2014, which came in low enough to abide by the terms of Murray-Ryan.

The big change from what spending would have been with the automatic cuts was that law (also known as the "appropriations omnibus") partially restored funding for Head Start, as well as defense and some other domestic programs like Section 8 housing subsidies and the National Institutes of Health. This is the spending law we're currently working with, and which expires at the end of the month.

2) The continuing resolution continues the status quo

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House Appropriations Chair Hal Rogers (R-KY), who will be involved in any December appropriations debate. (Alex Wong / Getty Images)

The bill approved by the Senate and House and headed to Obama's desk continues the levels of spending agreed upon in January. Indeed, it actually falls under the Budget Control Act's overall discretionary spending caps.

The problem is that there are separate caps for defense and non-defense spending. And while defense spending falls well under the agreed-upon cap, non-defense spending misses it by a little bit. That means it would trigger sequestration if it were to be extended through the rest of fiscal year 2015 (which starts October 1, 2014 and goes through September 2015). The current spending bill lasts a short enough period to avoid that from happening, but as Congress weighs spending for the rest of the fiscal year, it'll have to figure out a way around the cap problem.

3) Deficit hawks lost

spoon medicine

Deficit hawks wanted to tackle health spending. Congress' deficit reduction didn't do that. (UIG via Getty Images)

By any reasonable standard, the US has done a lot of deficit reduction since Republicans took the House in 2011. The Center for Budget and Policy Priorities' Richard Kogan estimates that the 2011 House appropriations process and the Budget Control Act resulted in a $1.915 trillion ten-year spending cut. The fiscal cliff deal, in which the Bush tax cuts for high earners were allowed to expire, added hundreds of billions in new tax revenue. And health-care spending is falling, providing additional deficit reduction through reduced Medicare, Medicaid and Obamacare spending.

Of these, only the latter really amounts to deficit reduction of the sort that budget hawks have been pushing for for decades. Any budget expert will tell you that the long-term drivers of budget deficit growth are (a) the fact that health care spending grows faster than the rest of the economy, meaning government health spending rises faster than GDP and (b) the aging of the population. That's why deficit reduction plans often take the form of entitlement reform proposals meant to stem spending on Medicare and Social Security.

us defense spending global

Peter G. Peterson Foundation

The Budget Control Act cut Medicare a bit. But it really cut into the parts of the budget that aren't drivers of the deficit in the long run: defense and non-defense spending unrelated to entitlements. You can make the case for cuts in this area; the US spends far more on defense than China, Russia, Saudi Arabia, France, the UK, Germany, Japan, and India combined. But defense isn't what's making the deficit rise in the very long run.

So we're left in a weird place, with a lot of deficit reduction that makes nobody happy. People who think deficit spending can actually be valuable in an economic recovery are obviously unhappy, but principled deficit hawks are unhappy, too.

Thanks to Marc Goldwein and Adam Shifriss of the Committee for a Responsible Federal Budget for help analyzing next year's budget caps.

Correction: Richard Kogan of the Center on Budget and Policy Priorities notes that programs besides Head Start also got some funding restored in the January omnibus appropriations bill. We regret the error.

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