Media accounts of
the budget agreement
President Trump signed
August 2 have been all over the map. It
therefore seems useful to describe what it does and does not do.
First, it suspends
the statutory debt ceiling until July 31, 2021.
The alternative would have been for the Treasury to have been unable to
pay all the federal government’s bills as soon as early September. This is widely regarded as likely to frighten
financial markets and undermine confidence in the stability of the U.S.
government. Prior projections had suggested
that the Treasury could execute bookkeeping pyrotechnics to live within the current
debt limit well into the fall, but the 2017 tax legislation reduced corporate
tax receipts more sharply than had been anticipated.
This adjustment of
the debt limit, like the last several, treats the debt limit as a date rather
than an amount. Any debt incurred
through July 31, 2021, effectively does not count against the debt limit. After that date, the Treasury cannot incur
additional debt without further legislation.
It then may return to financial pyrotechnics and continue to pay the federal
government’s bills for a few more months.
Second, the budget
deal sets new ceilings for discretionary appropriations for federal fiscal
years 2020 and 2021. Without this
legislation, Congress would be obliged to adhere to the draconian levels set in
the Budget Control Act of 2011. Few
serious Members of Congress from either party believe those levels are
realistic (although, predictably, Republicans find the defense cap intolerable
while Democrats worried about the non-defense discretionary appropriations limits). Failure to adhere to these ceilings would
have resulted in across-the-board cuts similar to those implemented in 2013.
Contrary to some
media accounts, the new appropriations ceilings are not
generous. Instead, they only suffice
to prevent large additional degradation of government functions. Claims that they provide large amounts of new
funding rely on comparisons with the unrealistic Budget Control Act levels that
would have required deep programmatic cuts.
The new ceilings are roughly comparable with those in federal fiscal
year 2019, the current year. (They do
allow for additional funding to prepare for next year’s decennial census without
having to cut other programs to pay for it.)
After adjustment
for inflation, these levels are still considerably below those from Fiscal Year
2010, the last year before congressional Republicans succeeded in getting
President Obama to accept austerity to address deficits driven by the Great
Recession. The shortfall is even greater
if one also adjusts for the roughly one percent annual increases in population. The same inflation-adjusted appropriation
cannot serve additional children and pregnant women needing WIC food
assistance, additional visitors to our national parks, additional children
needing child care, and so forth. Similarly,
the budget deal will keep discretionary spending near
historic lows as a fraction of total economic output.
Third, although
the budget deal does not directly resolve any spending disputes except the
overall levels of defense and non-defense discretionary appropriations, it significantly
reduces the likelihood of a government shutdown this fall. Ceilings close to the inflation-adjusted
current levels will force fewer difficult choices that could divide Republicans
from Democrats than would the Budget Control Act levels. Congress and the President still have a long
way to go, however, to set spending for specific programs in fiscal year 2020,
which begins October 1.
As previously noted,
although the House has passed ten of the twelve annual appropriations bills
required to fund the federal government, the Senate has not even begun to move
any of these bills. Senate staff are
working over the current recess to try to craft appropriations bills. These may see action in subcommittees, or
possibly the full Senate Appropriations Committee, but few if any likely will
reach the Senate floor. (Sen. McConnell still
has many judges to confirm.) As soon as
the Senate appropriators write their bills, informal negotiations will begin
with the House.
Few if any appropriations
bills likely will yield bicameral agreements by September 30 so Congress likely
will have to pass a continuing resolution to fund the government until late
Fall. Whether Congress and the President
will be able to agree to a full set of appropriations bills, or if not which
ones will be left behind and subject to government shutdowns, is difficult to
predict at this point. Presumably each
party will insist on passing some of its favorite appropriations bills on which
agreement has been reached as a price for passing settled bills that the other
party prioritizes. The parties appear to
have agreed not to include any riders (substantive limitations on how
appropriated funds may be spent) to which either party strongly objects. Still, the sheer number of controversies in
these bills, and the President’s increasing
disinclination to defer to his staff or allow them to speak for him, may make
negotiating final funding levels challenging.
Finally, this
budget deal represents the final demise of the Budget Control Act. The Act’s caps only ran through 2021 and so
now have been wholly superseded. In a
sign that the Act has long-since lost all credibility as budget policy, Democrats
were able to force Republicans to drop demands to extend those caps or to make
cuts in entitlement programs to pay for the increases in the caps this
year. (Previous biennial bipartisan
cap-raising deals had included such offsets.)
Given the damage the 2017 tax act did to the country’s fiscal position,
Republicans apparently did not want a serious debate about culpability for
large deficits. Whether the political
system will permanently accept the obvious lesson – that neither party feels
deeper cuts in discretionary spending will be acceptable to their constituents –
remains to be seen.
@DavidASuper1