Federal Budget Would Raise Spending by $320 Billion
If passed by Congress and signed by President Trump, the deal would stop a potential debt default this fall and avoid automatic spending cuts next year. The agreement would also bring clarity about government spending over the rest of Mr. Trump’s term, though Congress must still fill in the details, program by program.
“I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck 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,” Mr. Trump announced on Twitter. “This was a real compromise in order to give another big victory to our Great Military and Vets!”
A statement issued late Monday by Stephanie Grisham, the White House press secretary, echoed Mr. Trump’s tweet and urged both chambers to pass the deal quickly.
But it is another sign that a Capitol once consumed by fiscal worries simply no longer cares — even as the government’s deficit approaches $1 trillion a year. Still, the accord would lift the debt ceiling high enough to allow the government to keep borrowing for two more years, punting the next showdown past the 2020 elections.
“It’s pretty clear that both houses of Congress and both parties have become big spenders, and Congress is no longer concerned about the extent of the budget deficits or the debt they add,” said David M. McIntosh, the president of the Club for Growth, a conservative group that advocates free enterprise.
The agreement, negotiated largely by Ms. Pelosi and Treasury Secretary Steven Mnuchin, would raise spending by about $320 billion, compared with the strict spending levels established in the Budget Control Act of 2011 and set to go into effect next year without legislative action. Spending on domestic and military programs would both increase, a key demand of Ms. Pelosi and Mr. Schumer, offset by $77.4 billion in spending cuts, half the $150 billion in cuts some White House officials initially demanded.
In a joint news release, Ms. Pelosi and Mr. Schumer praised “robust funding for critical domestic priorities,” saying that since the 2017 fiscal year, they had pushed domestic spending up by $100 billion. The deal includes an additional $2.5 billion for the 2020 census, according to a senior Democratic aide, and domestic programs would see about $10 billion more than military programs over two years.
The negotiators hope to enact the deal before Congress leaves for its August recess.
“While the reality of divided government means this is not exactly the deal Republicans would have written on our own, it is what we need to keep building on that progress,” Mr. McConnell said.
Trouble could still come as Congress drafts detailed spending bills that must win the president’s signature. The year started with the longest-ever government shutdown, precipitated by Mr. Trump’s refusal to fund the government without money for a border wall.
But with the top-line figures all but secured, the deal would be the end of the Budget Control Act, which President Barack Obama signed into law after House Republicans pushed the government to the brink of defaulting on its debt. That law, once seen as the Republicans’ crowning achievement in the Obama era, set strict spending caps, enforced with automatic spending cuts.
But since 2014, a succession of budget deals have waived those caps, and the new deal not only lifts them again but also allows the whole law to expire in 2021.
And this time around, the approach of the debt limit hardly caused a ripple of consternation about the rising red ink. “I’ve seen no evidence that it’s even being discussed,” said Senator James Lankford, Republican of Oklahoma. “That’s the hard part for me.”
Meantime, the federal debt has ballooned to $22 trillion. Despite healthy economic growth, the federal deficit for this fiscal year has reached $747 billion with two months to go — a 23 percent increase from the year before.
“It appears that Congress and the president have just given up on their jobs,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, which blasted out a statement arguing that the tentative deal “may end up being the worst budget agreement in our nation’s history.”
“The economy is great and able to accommodate changes,” she said in an interview. “But we’re about to make things worse due to nothing other than the lack of political will.”
The rising costs of an aging population, with the baby boom generation drawing Social Security and Medicare benefits, and Washington’s spending habits have led to increases in both federal spending and interest costs on the growing national debt. During the first two years of the Trump administration, the debt increased by more than $2 trillion, in part because of the 10-year, $1.5 trillion tax cut and large spending increases Mr. Trump signed into law.
The president has repeatedly called for deep spending cuts in the budgets he has submitted to Congress — then signed several laws that have increased the deficit even further.
As president, Mr. Trump has overseen both a binge in discretionary spending, the part of the federal budget governed by annual spending bills, and a plunge in expected tax revenues as a result of the tax cuts that stand as his signature legislative achievement. The federal budget deficit has increased by an average of 15 percent for each fiscal year he has been in office.
Mr. Obama ran large deficits in his first term in the wake of the 2008 financial crisis. But in his second term, deficits fall by an average of 11 percent per fiscal year.
In that first Obama term, which included a large government stimulus package to jump-start job creation in the depths of the recession, discretionary spending on military and domestic items rose by about 3 percent per year, on average. In his second term, such spending declined by an annual average of nearly 2 percent.
Mr. Trump is currently on pace to increase discretionary spending by an average of nearly 4 percent per year.
Mr. Trump’s tax cuts, which reduced rates for businesses and individuals, have not paid for themselves, as some administration officials said they would. Instead, they have reduced individual and corporate tax revenues by about 8 percent per year, compared with what budget forecasters expected before the cuts were passed into law.
Combined with increased costs from paying interest on a larger national debt, the tax cuts are on pace to add nearly $400 billion to the national debt during the 2018 and 2019 fiscal years, according to data from the Congressional Budget Office.
But Democrats are not inclined toward austerity either. In the first round of Democratic presidential debates, the national debt was barely mentioned.
Still, passage of the budget agreement is not certain. Ms. Pelosi and Mr. Mnuchin, who have led the negotiations in private phone calls over the last week, will have to sell the deal to their parties ahead of an anticipated House vote this week, before that chamber leaves on Friday. The Senate is scheduled to leave for its recess next week.
In her caucus, Ms. Pelosi must wrangle votes from both fiscal hawks and liberal members opposed to increased military spending. And while the president has offered his endorsement, Mr. Mnuchin must wave off critics of government spending, particularly among House Republicans and fiscal hawks like the White House’s acting chief of staff, Mick Mulvaney.
Representative Chip Roy, the freshman Republican from Texas, is leading a letter encouraging the president to veto the bill as fiscally irresponsible, a move first reported by Politico.
“I’m just concerned that there is too much flexibility for the president to move money around,” said Senator Patrick J. Leahy, Democrat of Vermont and the ranking member on the Senate Appropriations Committee, adding in a statement late Monday that he would support the measure.
But the threat of an economically disastrous default on the nation’s debt, coupled with widespread desire to avoid automatic cuts to military and domestic programs, are likely enough for the proposed measure to become law.
“I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge,” Mr. Trump said on Friday. “We can never play with it.”
Once a deal is enacted, lawmakers have to race to agree on how to allocate the money before Oct. 1, when current spending laws expire. The agreement dictates that the top congressional leaders, appropriations committees and the administration will work to avoid a government shutdown and a 12-bill omnibus package.
By Emily Cochrane, Alan Rappeport and Jim Tankersley