With big spending bill, Congress signals era of austerity in Washington is over

For most of the past seven years, Washington politicians — particularly Republicans — have talked a big game about fiscal responsibility, trumpeting budget belt-tightening and spending restraint in an era of deep bipartisan concern over big federal deficits.

But Donald Trump’s Washington is ready — really ready — to move on from this era of fiscal hawkishness: early Friday, Democrats and Republicans in Congress passed a budget deal that would blow away existing caps on defense and nondefense spending by the federal government, to the tune of nearly $300 billion over two years.

The legislation is a decisive rebuke to the regime of automatic spending cuts, known as sequestration, which took effect in 2013 and was intended to reduce federal deficits by over $1 trillion over 10 years. For the Republicans in control of government, it’s a remarkable departure from a decade of running on a politics of hard-line fiscal conservatism.  

Trump and his GOP allies in Congress were eager to jack up spending on the military, but that would have been hard to pass into law without enticing Democrats by offering a roughly commensurate increase in spending on non-defense programs.

Congress has approved sequestration-relief in the past, but lawmakers had insisted previously on accounting for increased spending with budget cuts and/or increased revenue elsewhere. There’s been little discussion of “off-setting” spending increases this time around.

The spending deal also comes on the heels of the Republicans’ sweeping cuts to taxes, which are projected to add as much as $1.5 trillion to federal red ink over a decade. Though there are notable holdouts, including a few in the Minnesota delegation, Congress appears to be enthusiastically embracing a new era of heavy spending on the military and social programs, and worrying about picking up the check later.

A ‘huge’ change from the way things used to be

After the spending deal was unveiled by GOP and Democratic leaders in the U.S. Senate on Wednesday, most Republican lawmakers, and quite a few Democrats, quickly got on board.

By early Friday morning, the Senate overwhelmingly approved the legislation, 71 to 28, and the House of Representatives followed suit, voting 240 to 186 to send it to Trump’s desk. In the Senate, DFL Sens. Amy Klobuchar and Tina Smith voted yes. In the House, DFL Reps. Betty McCollum and Rick Nolan voted in favor of the budget deal, with Rep. Erik Paulsen the only Republican to join then in the yes column. GOP Reps. Jason Lewis and Tom Emmer, and DFL Reps. Keith Ellison, Collin Peterson, and Tim Walz voted no.

Though there was some uncertainty on the House side, ultimately, the only real drama was provided by Kentucky Sen. Rand Paul, whose indignation that the GOP would pass such a massive spending bill led him to take procedural measures to delay the vote. Technically, the government was shut down for a period of several hours, as funding ran out at 12:01 AM on Friday.

The legislation, dubbed the Bipartisan Budget Act of 2018, represents the biggest increase in federal spending in nearly a decade. The bill would increase military spending by $80 billion for fiscal year 2018, and increase spending for all non-defense programs by $63 billion, accounting for a $143 billion budget bump in total. For fiscal year 2019, both sides would be increased by a total of $150 billion. (Under previous law, the defense budget was capped at $551 billion and nondefense discretionary spending at $516 billion for fiscal year 2018.)

Attached to the agreement on caps are other important items desired by both sides: an extension of the federal government’s borrowing authority, also known as the “debt ceiling,” to March 2019, and additional appropriations for aiding victims of last year’s natural disasters, funding programs to counter the opioid crisis, and funding four more years of the federal Children’s Health Insurance Program. (The increases included in the bill, for a two-year period, total closer to $500 billion, with everything added in.)

The budget discussion has dominated Washington recently because lawmakers were required to set top-line spending levels before they could complete the appropriations process that determines how much money specific departments and programs receive. For the current fiscal year, which is more than a third complete, Congress has passed five so-called “continuing resolutions,” which simply extend the levels of government funding set out previously.

The last big budget agreement was brokered by former President Barack Obama and John Boehner, then the outgoing Speaker of the House, and it expired at the end of last year, putting further pressure on lawmakers to lay out an updated fiscal vision.

The 2015 Obama-Boehner agreement, and a 2013 agreement before it negotiated by GOP Rep. Paul Ryan and Democratic Sen. Patty Murray, both eased the impacts of sequestration, but to far more modest extents than does this week’s deal. The 2015 budget agreement approved a one-year increase of $50 billion in spending, divided equally between defense and non-defense programs, and its predecessor from 2013 approved a $45 billion increase.

The deal this week blows those totals out of the water, and it does so without the prospect of political pain that overshadowed the 2013 and 2015 agreements, which fiscal conservatives in the GOP howled over and derided as massively irresponsible. Boehner had more latitude to negotiate the 2015 agreement because he’d already announced his retirement as Speaker, and didn’t need to worry about losing his gavel over brokering a deal to raise spending.

The new package brings Capitol Hill’s recent budgeting-by-crisis to an end, and raises the federal budget to its highest level since lawmakers appropriated trillions for bank bailouts and economic stimulus following the financial crisis of the late 2000s.

Notably, this time around, congressional leaders have not included, or even really pushed for, significant spending cuts to counter the impact of spending increases on the deficit. Some old ploys are being used to help pay for some of the package — oil sales from the Strategic Petroleum Reserve will provide $350 million in new revenue — but the price tag of the budget deal is largely not paid for elsewhere.

According to Mark Harkins, a former congressional chief of staff and an expert on congressional budgeting at Georgetown University’s Government Affairs Institute, this represents a significant departure from the way Congress has approached the issue over the last seven years.

“This is the first time that Congress is talking about breaching the cap levels and not paying for them,” he told MinnPost. “That’s huge. That’s a totally different point of view than we’ve had in congressional considerations of the budget over the last decade. They’re not small amounts. We’re not talking $30 to $40 billion — we’re talking $150 billion.”

What changed?

It was not long ago that self-proclaimed budget hawks like Ryan pointed to alarmist charts at press conferences to decry the rising tide of federal red ink, and even Democratic leaders like Obama insisted on spending deals with deficit concerns in mind.

In 2011, congressional Republicans risked a catastrophic default on the U.S. debt by refusing to raise the debt ceiling without significant cuts in federal spending. They coalesced behind a plan called Cut, Cap, and Balance — cutting current spending, capping future spending, and instituting legislation to require balanced budgets. That ultimately did not become law, but it was considered the mainstream GOP’s litmus test on fiscal issues.

Far from cutting, capping, or balancing, the legislation GOP leadership is enthusiastically plugging is projected to lead to a $1.2 trillion deficit in 2019.

Behind this remarkable shift are a few things that have increased Washington’s appetite for spending and decreased pressure for Republicans to act, or appear to act, in a deficit-minded way.

First and foremost, nearly everyone agrees that many D.C. policymakers on both sides are just tired of the austerity put into place by sequestration. Those automatic cuts to military and discretionary spending were meant to be so unappealing and politically toxic that they would force Republicans and Democrats to compromise on a grand budget agreement during negotiations in 2011. (Spoiler: they didn’t.)

The cuts have worked as intended — annual federal deficits are trending down, even if most hated the mandatory caps. But the relative spending drought has left lawmakers yearning to replenish their favored programs.

For the GOP, enthusiasm has largely been on the military side of the budget. Republicans in Congress — many of whom are staunch supporters of the military and represent districts that benefit greatly from Pentagon activity — have been pushing to increase military spending for years.

Military advocates got serious momentum in Trump, who ran on a platform of significantly beefing up military spending. In his first budget request to Congress last spring, Trump asked for a $603 billion budget for the Department of Defense; under this deal, Pentagon spending would be set at $700 billion for fiscal year 2018.

But in Trump, Republicans also got control of the White House and Congress — giving them, for the first time in over a decade, a chance to align spending priorities as they see fit.

Most Republicans would have liked to simply increase defense spending alone without accompanying it with increases in non-defense spending, but their relatively slim majorities in both chambers mean they need to accept a ramping-up of discretionary spending to ensure a defense boost — a trade-off most Republicans are willing to make. (The deal sets a cap for non-defense spending at $591 billion for FY 2018.)

In a press release, Paulsen touted the budget as a bipartisan win, though he has cut a profile as a fiscal conservative who warned in 2010 about “runaway spending and record debt” in response to the Obama stimulus package. “Minnesotans expect their elected representatives to govern and lead,” he said. “‘Compromise’ is not a dirty word and we should realize what can be achieved by finding areas of common ground.”

‘Typical Washington’

But the bipartisan deal has plenty of critics on both sides of the aisle. Lewis, a vocal fiscal hawk and a member of the House Budget Committee, panned the legislation, and said it was proof the D.C. establishment is winning.

“This is not a step in the right direction on the deficit and debt,” the 2nd District Republican said. “I can’t in good conscience support it… this ‘deal’ is something that is typical Washington.”

“I thought there’s nothing wrong with sequestration. If we’re not going to do our job, there’s nothing wrong with, ‘if you’re not going to get your act together, this is what’s going to happen,’” Lewis said. “The default position is, how about if I fund your program and you fund my program,” he continued.

Lewis’ Republican colleagues, Harkins says, have been tempted by the power of setting the agenda and deciding who gets the money — and how much of it.

“When they have this in their pocket, they don’t want to cut things, they want to direct things… it was a whole lot easier for Republicans to say they were for cutting the government when they didn’t control the White House and didn’t control the government.”

The sidelining of deficit-minded rhetoric from the GOP mainstream was also evidenced in the party’s enthusiastic support of a tax plan, passed last December, that could add $1.5 trillion to the deficit over a decade. Proponents insisted that its cost would be offset with increased revenue created by a stronger economy, but many economists dispute that claim.

According to David Reich, a senior fellow at the Center for Budget and Policy Priorities, a center-left D.C. think tank, deficit politics are no longer convenient for the GOP.

“They have certainly found that the deficit concern conflicts with things they want to do,” he told MinnPost. “It certainly conflicts with their desire for a very large tax cut package, particularly on the corporate side. On the appropriated side, there’s certainly strong support on the Republican side of the aisle for big increases in defense. That runs right into their traditional position of deficit reduction.”

“They’d say, well, of course, they should be offset in theory. That’s not necessarily happening,” Reich explains. “The drive for offsets certainly seems to be diminished.”

On the Democratic side, 119 House representatives voted no, largely because there was no discussion of a fix for young undocumented immigrants, known as the Dreamers, in the legislation.

Ellison — who told MinnPost on Thursday night “no DACA, no deal” — voted no. The 5th District Democrat also sounded incredulous that the GOP would approve such a spending increase: “They just passed a tax bill that cost an enormous amount of money, and now they’re going to do this big spending bill with all this defense money?”

Time for dessert

The passage of the budget sparks a bonanza for congressional appropriators, who can now outlay funds for the rest of the fiscal year for specific programs.

Military appropriators are relieved: they argue the deal allows the Pentagon to finally make long-term spending plans that boost the armed forces’ capability and readiness.

Democratic proponents of the deal are savoring the chance to appropriate more money to the federal programs they hold dear, and also touted the additional spending provisions on the bill, including $7 billion for community health centers, $4 billion for Veterans’ Administration hospitals, and $2 billion for research at the National Institutes of Health.

There will be a greater price for D.C. to pay for this deal, lawmakers like Lewis say — if not now, then later. “There’s got to be something going forward to get a handle on this before we have a sovereign debt crisis, for crying out loud,” Lewis says. “We can’t keep spending like this without real dislocations in the economy.”

Harkins forecasts that this run of spending may set up another round of unpopular austerity in the future, if the combination of increased expenditures and a greater-than-expected impact on the deficit from the tax plan bring red ink back up to late-2000s levels.

Ultimately, that’s a concern for another time. “Members of Congress are tired of eating vegetables,” Harkins said, “and they’re ready to have some dessert. And the president seems to like two scoops.”