The White House and House Speaker Nancy Pelosi (D-Calif.) reached a tentative two-year budget deal Monday that would raise spending limits by $320 billion and suspend the federal debt ceiling until after the 2020 presidential election.
The agreement, which still must be passed by Congress, probably would prevent a debt-ceiling crisis later this year but also would continue Washington’s borrowing binge for at least 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 met with fierce resistance from some prominent Republicans who said that it would add too much to the debt, a backlash that will force congressional leaders to work hard this week to ensure they have enough votes for passage. The agreement also could spark concerns from some House liberals because of concessions made to the Trump administration, as both parties try to stake out positions that resonate with voters ahead of the 2020 election.
The agreement marks a significant retreat for the White House, which insisted just a few months ago that it would force Congress to cut spending on a variety of programs 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 to future spending bills, although it’s unclear how that commitment would be enforced.
Pelosi brokered the deal with Treasury Secretary Steven Mnuchin, whom Democrats and even some Republicans had considered 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 probably wouldn’t constrain any future spending. But the deal locked in more spending for the military, something Trump has tried to make a hallmark of his first 30 months as president. He has told advisers that if he is reelected, he wants to focus on spending cuts beginning in 2021, and he has largely cast aside the budget-slashing goals some of his aides have advocated 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 probably would not need to be addressed again until the fall or winter of that year. And the agreement would set spending levels through Sept. 30, 2022.
The deal was reached as the House prepares to leave Washington at the end of this week for a six-week summer recess, giving Pelosi little margin for error to pass the legislation in a matter of days. The Senate is in session for an additional week and is expected to take up the deal next week before senators, too, head out on recess.
Many Republicans spent the bulk of the Obama administration insisting that the budget needed to shrink and calling for a constitutional amendment to balance it. 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, leading to a long government shutdown.
“Somebody needs to calmly and clearly lay out the alternatives, because we saw what happened last time,” Sen. John Cornyn (R-Tex.) told reporters Monday. “We ended up in a shutdown mode, and I don’t think that’s good for anybody.”
Still, some conservatives expressed outrage Monday that the White House would back such a big increase in spending when deficits are already ballooning.
Rep. Mike Johnson (La.), chairman of the Republican Study Committee, said he spoke 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 stop using money from military programs to build a wall along the U.S.-Mexico border.
And others complained that their extensive efforts to boost funding for things such as college are frequently dismissed while conservative priorities are often met.
“Notice how whenever we pursue large spending increases + tax cuts for corporations, contractors & connected, it’s treated as business as usual,” Rep. Alexandria Ocasio-Cortez (D-N.Y.) wrote on Twitter. “But the moment we consider investing similar [money] in working class people . . . they cry out it’s ‘unrealistic.’ ”
Also as part of the deal, Democratic leaders agreed not to include controversial policy changes, known as “riders,” in future spending bills. Those measures, which can be tied to hot-button issues such as abortion and immigration, can imperil spending legislation. Opponents of these measures often call them “poison pills.”
“There will be no poison pills, additional new riders . . . or other changes in policy or conventions,” congressional leaders wrote in an outline of the deal.
But lawmakers often disagree on what constitutes a poison pill, and the debate could be revived once specific spending bills are introduced.
By raising spending limits 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.
“With this agreement, we strive to avoid another government shutdown, which is so harmful to meeting the needs of the American people and honoring the work of our public employees,” Pelosi and Schumer (D-N.Y.) said in a joint statement.
Lawmakers and the White House still must pass spending bills to fund government operations for the next fiscal year, which will begin in October, but that is considered 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 limits had begun 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 about $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, President Barack Obama’s last full year in office, and is projected to reach $1 trillion this year. The larger deficit is a result of higher spending and the 2017 tax cuts, which have 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 has helped the economy grow and that they plan to cut spending when the economy is on a stronger footing.
The deal could raise questions about the White House’s future negotiating strategy. Democrats targeted Mnuchin as a negotiating partner during the current talks because they thought he represented their best option for a compromise. Typically, the budget director or White House 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 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 are likely to 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.”
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