WASHINGTON (AP) — President Donald Trump and congressional leaders announced Monday a critical debt and budget agreement that’s an against-the-odds victory for Washington pragmatists seeking to avoid political and economic tumult over the possibility of a government shutdown or first-ever federal default.
The deal, announced by Trump on Twitter and in a statement by Democratic House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer, will restore the government’s ability to borrow to pay its bills past next year’s elections and build upon recent large budget gains for the Pentagon and domestic agencies.
“I am pleased to announce that a deal has been struck,” Trump tweeted, saying there will be no “poison pills” added to follow-up legislation. “This was a real compromise in order to give another big victory to our Great Military and Vets!”
The agreement is on a broad outline for $1.37 trillion in agency spending next year and slightly more in fiscal year 2021. It would mean a win for lawmakers eager to return Washington to a more predictable path amid political turmoil and polarization, defense hawks determined to cement big military increases and Democrats seeking to protect domestic programs.
Nobody notched a big win, but both sides view it as better than a protracted battle this fall.
Pelosi and Schumer said the deal “will enhance our national security and invest in middle class priorities that advance the health, financial security and well-being of the American people.” Top congressional GOP leaders issued more restrained statements stressing the deal is a flawed but achievable outcome of a government in which Pelosi wields considerable power.
“While this deal is not perfect, compromise is necessary in divided government,” House Minority Leader Kevin McCarthy, R-Calif., said.
However, it also comes as budget deficits are rising to $1 trillion levels — requiring the government to borrow a quarter for every dollar the government spends — despite the thriving economy and three rounds of annual Trump budget proposals promising to crack down on the domestic programs Pelosi is successfully defending now. It ignores warnings from deficit and debt scolds who said the nation’s fiscal future is unsustainable and will eventually drag down the economy.
“This agreement is a total abdication of fiscal responsibility by Congress and the president,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a Washington advocacy group. “It may end up being the worst budget agreement in our nation’s history, proposed at a time when our fiscal conditions are already precarious.”
A push by the White House and House GOP forces for new offsetting spending cuts was largely jettisoned, though Pelosi, D-Calif., gave assurances about not seeking to use the follow-up spending bills as vehicles for aggressively liberal policy initiatives.
The head of a large group of House GOP conservatives swung against the deal.
“No new controls are put in place to constrain runaway spending, and a two-year suspension on the debt limit simply adds fuel to the fire,” Republican Study Committee Chairman Mike Johnson, R-La., said. “With more than $22 trillion in debt, we simply cannot afford deals like this one.”
Fights over Trump’s U.S.-Mexico border wall, other immigration-related issues and spending priorities will be rejoined on spending bills this fall that are likely to produce the same result as current law. The House has passed most of its bills, using far higher levels for domestic spending. Senate measures will follow this fall, with levels reflecting the accord.
At issue are two separate but pressing items on Washington’s must-do agenda: increasing the debt limit to avert a first-ever default on U.S. payments and acting to set overall spending limits and prevent $125 billion in automatic spending cuts from hitting the Pentagon and domestic agencies with 10 percent cuts starting in January.
The threat of the automatic cuts represents the last gasp of a failed 2011 budget and debt pact between former President Barack Obama and then-Speaker John Boehner, R-Ohio, that promised future spending and deficit cuts to cover a $2 trillion increase in the debt. However, a bipartisan deficit “supercommittee” failed to deliver, and lawmakers were unwilling to live with the follow-up cuts to defense and domestic accounts. This is the fourth deal since 2013 to reverse those cuts.
Prospects for an agreement, a months-long priority of top Senate Republican Mitch McConnell, R-Ky., became far brighter when Pelosi returned to Washington this month and aggressively pursued the pact with Treasury Secretary Steven Mnuchin, who was anointed lead negotiator instead of more conservative options like acting White House Chief of Staff Mick Mulvaney or hardline Budget Director Russell Vought.
Mnuchin was eager to avert a crisis over the government’s debt limit. There’s some risk of a first-ever U.S. default in September, and that added urgency to the negotiations.
The pact would defuse the debt limit issue for two years, meaning Trump or his Democratic successor would not have to confront the politically difficult issue until well into 2021.