US' Tentative 2-year budget deal's plans

The outlook for the U.S. economy has brightened somewhat and the day of Fed tightening has likely edged closer because of a potential U.S. budget deal. 

On Monday, congressional leaders and the Administration reached a tentative deal on a two-year budget accord. If passed in Congress later this week, and the odds are reasonably good that it will, the plan would:

•  Raise federal spending by $50 billion in fiscal 2016 (or 0.3% of GDP) and by $30 billion in fiscal 2017. The spending increases are split between defense (pleasing Republicans) and domestic programs (pleasing Democrats). The deal effectively raises the sequestered spending cuts for the next two years, though they would remain in effect from fiscal 2018 to 2021. 
  
  
• Reduce the budget deficit (pleasing Republicans, including some hardliners). Budget savings and revenue increases will come from cuts to some social programs and oil sales from the Strategic Petroleum Reserve.
  
  
•  Raise (or more aptly, suspend) the debt ceiling until March 2017, avoiding a near-term hit to the economy had the government been forced to delay payments to suppliers and public sector workers. It also avoids the possibility of a credit-rating downgrade had the government missed some debt payments.
  
  
•  Remove the risk of a partial government shutdown, which was looming beyond December 11 when the current stop-gap spending bill to fund government programs expired. It should now be a formality for Congress to pass appropriation bills to fund these programs for the current fiscal year.
  
  
•  Avoid election year brinkmanship that threatened another year of political gridlock and economic uncertainty.