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Guess what? DC could deliver a merry Christmas

Photo By Tom Williams | CQ Roll Call | Getty Images

A very odd thing seems like it may happen this week.

If talks continue to progress, Congress seems fairly likely to make a deal on the 2014 budget before adjourning for the year that both lifts some of the sequester burden and takes the fear of another shutdown off the table for another 12 months.

It seems hard to believe given all the nation has suffered at the hands of Washington in the last three years. But there is a decent chance that the economy, which is clearly picking up a little speed, may get a year's reprieve from anymore self-inflicted Beltway wounds.

Senate Budget Chairwoman Patty Murray and House Budget Chairman Paul Ryan are reportedly close to a deal that would fund the government for the next year at slightly above $1 trillion, a number above the $967 billion called for in the 2011 Budget Control Act. The negotiators, who could move their deal before the full House and Senate this week, would offset any deficit increase by raising government fees on airline tickets and perhaps trims to federal worker benefits and military pensions, among other possibilities.

The emerging deal is not a slam dunk with either party.

(Read more: DC squabbling could still wreck the economy in 2014)

Democrats are concerned about the benefit cuts and the fact that the agreement seems unlikely to further extend emergency unemployment benefits. Many also say it does not do enough to mitigate the 2014 sequester cuts. Republicans, especially conservatives in the House, are wary of adding any spending beyond the level agreed to in 2011, even if it's offset without raising taxes.

Still, if the agreement manages to bypass the official budget conference committee, as seems likely, it's difficult to see it getting blocked. It would almost surely pass the Senate, where Democrats would need just five Republicans, not an especially heavy lift. In the House, most Democrats would probably join Republicans in passing the budget bill.

Staunch tea party conservatives and liberal Democrats would be able to cast safe votes in opposition to the deal without fear of actually killing it, in the time-honored "vote no, hope yes" Washington tradition.

Passage of the measure by Friday would likely present a very merry Christmas to investors who could breathe somewhat easier in 2014 without threat of a fresh crisis.

(Read more: Washington is standing in the way of US recovery)

The budget deal, if it materializes, would follow another month of strong job creation that saw the jobless rate hit a five-year low with the size of the labor force increasing, indicating that Americans are growing more hopeful about their job prospects.

The jobs report had almost uniformly positive news, including increases in hours worked and wages, suggesting once again that employers will have to keep adding jobs rather than squeezing more out of their existing work force.

The fourth quarter GDP numbers are likely to be well below the revised third-quarter growth of 3.6 percent given the impact from the October shutdown. And the inventory build that showed up in the third quarter will fade. But according to many Wall Street economists, the weaker fourth quarter will just be a blip that gives way to 3 percent growth or better next year and into 2015.

But don't count Washington out just yet as a possible drag on 2014. The emerging budget deal does nothing to address the debt ceiling, which will have to be raised sometime in the spring. Treasury says the government will hit the borrowing limit—currently suspended until Feb. 7—by the end of March.

(Read more: Wall Street frets as Volcker Rule nears vote)

The Congressional Budget Office says Treasury might be able to use extraordinary measures to avoid default through May or early June. But whatever the exact date, the limit will have to be raised and it's not likely to be an easy vote, especially for the House GOP majority.

Here the timing becomes especially critical. If Congress can delay long enough to get many conservative members past their primaries, where they could face intense pressure to oppose any debt limit increase, then raising the borrowing limit with mostly Democratic votes would become much easier.

And then members of Congress could go back to bickering about things that would not blow up the global economy.

—By Ben White. White is POLITICO's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet POLITICO Morning Money [politico.com/morningmoney]. Follow him onTwitter @morningmoneyben.

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