The White House and House Speaker Nancy Pelosi (D-Calif.) reached a tentative two-year budget deal on Monday that would raise spending caps by $320 billion and suspend the debt ceiling until after the next presidential election.
The agreement, which still must be passed through Congress, would likely clear a debt ceiling crisis later this year but it would also continue Washington’s borrowing binge for at least the next two years.
“I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Charles E. Schumer, Speaker of the House Nancy Pelosi, and House Minority Leader Kevin McCarthy — on a two-year Budget and Debt Ceiling, with no poison pills,” President Trump tweeted Monday. “This was a real compromise to give another big victory to our Great Military and Vets!”
The deal was immediately met with fierce resistance from some prominent Democrats and Republicans, a backlash that will force congressional leaders to work hard this week to assure they have enough votes for passage.
Sen. Patrick J. Leahy, the ranking Democrat on the Senate Appropriations Committee, said he was furious that the deal would not block Trump from using funds to erect a wall along the Mexico border, and Republican Study Committee Chairman Rep. Mike Johnson (R-La.,) said he was angry the package added so much money to the debt.
Both parties are working to stake out positions that resonate with voters ahead of the 2020 elections.
The deal also marks a significant retreat for the White House, which insisted just a few months ago that it would force Congress to cut spending in a range of programs as a way to enact fiscal discipline. Instead, the White House agreed to raise spending for most agencies, particularly at the Pentagon.
In exchange, White House officials received verbal assurances from Democrats that they would not seek to attach controversial policy changes on future spending bills, though it’s unclear how that commitment will be enforced.
Pelosi brokered the deal with Treasury Secretary Steven Mnuchin, who Democrats and even some Republicans had seen as the best arbiter for a compromise. White House acting budget director Russell Vought sought last week to force Democrats to commit to $150 billion in budget changes in exchange for the new spending, but his demand was rejected.
Instead, negotiators agreed to $77 billion in accounting changes that likely won’t constrain any future spending. But it locked in more spending for the military and other programs, something Trump has tried to make a hallmark of his first 30 months as president. Trump has told a number of advisers that he wants to focus on spending cuts beginning in 2021, if he is reelected next year, and he has largely cast aside the budget slashing goals some of his aides have advocated for since his inauguration in 2017.
“We are I think doing very well on debt, if you look at debt limit, however you want to define that, but we’re doing very well on that and I think we’re doing pretty well on a budget,” Trump told reporters Monday. “Very important that we take care of our military, our military was depleted and in the last two-and-a half years we undepleted it, okay, to put it mildly, we have made it stronger than ever before. We need another big year.”
The deal would suspend the debt ceiling until July 31, 2021, meaning it would likely not need to be addressed again until the fall or winter of that year. And the two-year budget agreement would set spending levels through Sept. 30, 2022.
Many Republicans spent the bulk of the Obama administration insisting that the budget needed to shrink and calling for a constitutional amendment that would balance the budget. A number of those lawmakers have either left in recent years or muted their criticism of Trump’s embrace of big deficits, and some GOP leaders in recent weeks have said they need to focus on passing budget deals and not getting into messy fights without a clear strategy.
In December, Trump decided late in negotiations to block a bipartisan spending agreement, triggering a lengthy government shutdown.
“Somebody needs to calmly and clearly lay our the alternatives, because we saw what happened last time,” Sen. John Cornyn (R-Texas) told reporters Monday. “We ended up in a shutdown mode and I don’t think that’s good for anybody.”
Still, a number of conservatives expressed outrage on Monday that the White House would back such a big increase in spending when deficits are already ballooning.
Johnson, the Louisiana Republican, said he had spoken with Trump on Saturday and urged him to oppose the emerging deal.
“I encouraged the president that he would have his right flank if he would hold the line and allow us all to do the fiscally responsible thing and that is limit this out-of-control spending,” Johnson said. “He responded well … he understood the sentiments.”
Fiscal hawks also said they were mortified.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said “as we understand it, this agreement is a total abdication of fiscal responsibility by Congress and the President. It may end up being the worst budget agreement in our nation’s history.”
But some Democrats said they were upset that Democratic leaders did not secure a commitment from the White House that Trump would halt transferring money from military programs and using it to build a wall along the Mexico border.
“I’m worried the House is willing to give him far too much discretion to take money and move it anywhere he wants including a wall,” said Leahy, the Vermont Democrat. “So the way it is now I will not vote for it. . . . The other 99 can vote for it, I won’t.”
By raising spending caps for the military and nondefense programs for the next two years, the White House and Pelosi have effectively erased key remnants of the 2011 Budget Control Act, which was supposed to constrain spending for a decade.
Lawmakers and the White House still must pass spending bills to fund government operations for the next fiscal year, which begins in October, but that is seen as an easier task now that budget levels have been set. The $320 billion in new spending that the White House and Pelosi agreed to represents an increase over what the reduced budget levels would have fallen to if the caps had kicked in next year.
The government spends more money than it brings in through revenue, and that difference is called the budget “deficit.” To cover the deficit, the government borrows money by issuing debt. The debt has grown from roughly $19 trillion when Trump took office to more than $22 trillion this month. The government must pay interest on the money it borrows, and this year it will pay more than $350 billion to finance its borrowing.
The deficit has widened since Trump took office. It was $587 billion in 2016, Obama’s last full year as president, and is projected to reach $1 trillion this year. The larger deficit is due to higher spending and the 2017 tax cuts, which has led to a large drop in forecast revenue, according to budget experts. White House officials have argued that the combination of higher spending and tax cuts have helped the economy grow and that they plan to cut spending when the economy is on a stronger footing.
The deal could also raise questions about the White House’s negotiating strategy going forward. Democrats targeted Mnuchin as a negotiating partner during the current talks because they believed he represented their best option for finding a compromise. Typically, the budget director of chief of staff would play a more prominent role. But acting chief of staff Mick Mulvaney has poor relations with House Democrats and many have also written off working with Vought.
It’s unclear whether this dynamic will change when lawmakers begin their next round of negotiations on the specific spending bills, debates that will likely drag into September.
“I think Mr. Mnuchin has a different perspective on some of this than others in the administration, Mulvaney and Vought among others,” said Johnson, the Louisiana Republican. “And I don’t know if it’s yet decided which perspective will win the day. But we know there are some very smart and very thoughtful people involved in the negotiations and we hope that at the end of the day they’ll do the right thing.”
Comment s Damian Paletta Damian Paletta is White House economic policy reporter for The Washington Post. Before joining The Post, he covered the White House for the Wall Street Journal. Follow Erica Werner Erica Werner has worked at The Washington Post since 2017, covering Congress with a focus on economic policy. Previously, she worked at the Associated Press for more than 17 years. Follow Market Watch Dow 27,171.9 Today 0.07% S&P 2,985.03 Today 0.28% NASDAQ 8,204.14 Today 0.71% Last Updated:5:09 PM 07/22/2019 Subscriber sign in We noticed you’re blocking ads! Keep supporting great journalism by turning off your ad blocker. Or purchase a subscription for unlimited access to real news you can count on. Try 1 month for $1 Unblock ads Questions about why you are seeing this? Contact us
LINK ORIGINAL: Washington Post