Budget deal: Democrats and the White House are close to striking debt ceiling deal
Come October 1, not only will the government run out of funding and shut down, but the current government budget caps will expire, automatically triggering roughly $120 billion in across-the-board cuts to domestic and military programs. Meanwhile, after breaching the debt limit in March, the Treasury Department is already taking extraordinary measures to ensure the United States doesn’t default on its loans. That can only last for so long.
There’s some good news. The beginnings of a budget and debt ceiling deal formed over the weekend that would lift the nation’s debt limit for two years and likely avoid spending cuts, the Washington Post reported. That’s a good deal for Democrats and a big retreat from the Trump administration, which called for $150 billion in spending cuts. According to the Post, the budget cuts in this potential deal would go into effect down the road, which in Congress-speak means they will likely be overturned.
That said, this isn’t a final agreement. And there are still sticking points, specifically around funding for President Trump’s immigration agenda. In the past, House Democrats have leveraged their majority to limit Trump’s ability to fund his southern border wall.
For months, both the White House and leaders in Congress have appeared interested in averting such a crisis, but there has been little progress. But recently, House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin have been having regular phone calls to negotiate a deal. Senate Majority Leader Mitch McConnell reportedly has been advocating for a middle-ground deal on budget caps and the debt ceiling.
“We have indicated we’re not interested in a temporary increase in the debt limit,” House Majority Leader Steny Hoyer told reporters last week.
Trump and his administration remain a wild card in negotiations; Pelosi said Trump and fiscal hawks in his administration like White House acting chief of staff and Office of Management and Budget Director Mick Mulvaney, who has advocated for draconian budget cuts in the past, walked away from early talks in May. And Trump in April tweeted that a bipartisan budget deal was “not happening!”
If all parties can maintain the peace, then it looks like Trump and Congress can strike a clean budget deal. But they also have a lot to get done in a very limited window; Congress is set to go on its annual August recess next week.
We are here because of an Obama-era deal with Republicans
The need for budget caps goes back to 2011, when an Obama-era impasse over the debt ceiling brought the American economy to near calamity. Republicans in the House, led by then-Speaker John Boehner, refused to increase the debt limit without Congress addressing the national debt. It’s something Mulvaney played a role in back when he was one of the House’s archconservatives.
The face-off, which put the United States at risk of defaulting on its debt, pushed President Obama to sign the Budget Control Act. The law instructed Congress to find more than $1 trillion in government spending cuts by the end of the year or risk a sequester, which cuts all discretionary programs — defense and non-defense — across the board (except for entitlement programs like Medicaid and Social Security). Mulvaney was one of the Tea Party agitators who worked to block any increase to the debt limit, eventually forcing Obama’s hand to sign the BCA.
Congress failed to thoughtfully cut spending, which triggered automatic budget cuts in 2013 and imposed annual, more restrictive budget caps until 2021 — the sequester. The across-the-board budget cuts and established caps would amount to $1.2 trillion in cuts over the next 10 years. According to a 2015 report from the Center on Budget and Policy Priorities, funding for domestic programs was essentially flat between 2012 and 2015, meaning there were substantial cuts when adjusted for inflation.
Put simply, either Congress has to vote to raise the budget caps for defense and domestic spending or the country will go to sequester-level spending — which would mean roughly $71 billion in budget cuts to defense spending and $55 billion in cuts to domestic programs.
This is going to be a busy week for Pelosi. Now that a budget deal is coming together, she will want to act quickly and pass the budget bill before lawmakers are set to leave for August recess. Lawmakers theoretically could wait to pass a budget bill until they come back in early September, but the longer a deal sits, the more time the Trump administration would have to lobby to change it.