Congress, White House Reach Two-Year Budget, Debt Limit Deal

Congressional Democrats and Republicans and President Trump reached agreement today to raise budget caps for the next two fiscal years and suspend the debt limit until July 31, 2021.  The deal still must pass the House and Senate and be signed into law, but congressional leaders of both parties and the President have issued statements of support this evening.  It’s not over till it’s over, but if everyone sticks with the plan it would pave the way for passing FY2020 appropriations in a timely manner, which would be good news for civil and national security space programs, especially NASA’s Artemis Moon-by-2024 plan.

The two-year deal raises budget caps that were set in the 2011 Budget Control Act.  Under that law, if Congress approved spending above the caps, automatic across-the-board cuts called sequestration were required.  That happened in FY2013 and the consequences were so dire that Congress and the White House have agreed to raise the caps ever since on a two-year basis.  The last deal covered FY2018 and FY2019.  This one is for FY2020 and FY2021.

It also suspends the debt limit until July 2021.  The nation exceeded the current $22 trillion debt ceiling on March 2.  The Treasury Department has been using “extraordinary measures” since then, like not contributing its share into the federal retirement system, in order to pay the bills.  Treasury Secretary Steve Mnuchin has been warning that those measures will be exhausted in coming weeks, probably in early September.

If this deal becomes law, the threat of sequestration and of defaulting on the debt will be put aside until after the 2020 elections.

The White House issued a statement asserting Trump’s agreement.

President Donald J. Trump is pleased to have reached a bipartisan compromise with Congressional Leadership on a two-year budget and debt ceiling deal.  The agreement includes absolutely no poison pills.  This compromise will continue the rebuilding of our great military and ensure our veterans receive the care they deserve.  Both the House and the Senate should quickly move this deal to the President’s desk for signature. — White House Press Statement

The Republican and Democratic leadership of the House and Senate — House Speaker Nancy Pelosi (D-CA), House Minority Leader Kevin McCarthy (R-CA), Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D-NY) — issued  statements of support.

Pelosi, Mnuchin, Acting White House Chief of Staff Mick Mulvaney, and White House Acting OMB Director Russell Vought are being given credit for negotiating the deal.  McConnell refers to it as the “Administration-Pelosi Budget Deal,” which suggests he is trying to distance himself from it, but his statement does call for Congress to pass it and the President to sign it even if “it is not exactly the deal Republicans would have written on our own.”

Pelosi and McConnell both indicated they want to vote on the deal before Congress takes its August recess.  The House is scheduled to leave at the end of this week, while the Senate will be in Washington one week longer. Both return after Labor Day.  FY2020 begins October 1.

One sticking point between the parties has been funding for DOD.  Republicans have been insisting that DOD get $750 billion in FY2020 while Democrats argue the figure should be $733 billion.  Not one Republican voted in favor of the House version of the FY2020 National Defense Authorization Act (NDAA) in part because of that $17 billion difference.  Although there are other partisan issues in the NDAA, this should resolve the funding debate at least.  It sets the number at $738 billion. The top Republicans on the House and Senate Armed Services Committees, Rep. Mac Thornberry (R-TX) and Sen. Jim Inhofe (R-OK) said they support it.

The parallel bone of contention has been funding for non-defense programs, which include NASA.  Trump’s FY2020 budget request would have slashed non-defense spending, but this agreement boosts it by $27 billion in FY2020, to $632 billion.  How much of that will go to NASA is anyone’s guess, but it is a positive sign.  NASA Administrator Jim Bridenstine and Deputy Administrator Jim Morhard have said that the Artemis program cannot meet the 2024 goal to land astronauts on the Moon if the agency does not get its FY2020 funding, including the supplemental $1.6 billion requested in May, in a timely manner.

The House passed the FY2020 appropriations bill that funds NASA in June, but it does not include any of the $1.6 billion. NASA is counting on the Senate to add it, but the Senate has not acted on any of its appropriations bills yet.  Senate Appropriations Committee Chairman Richard Shelby (R-AL) said he would not mark up the bills until agreement was reached on the budget caps. If this deal is signed into law, that would open the door to Senate action and then compromise with the House perhaps in time for the beginning of FY2020.

The House has passed 10 of the 12 regular FY2020 appropriations bills.  Only Homeland Security and Legislative Branch are awaiting action.

While the party leaders and the President support the deal, that does not mean it will have clear sailing.  It is a compromise and there undoubtedly will be those on both sides who disapprove.

For example, many Republicans have run and are running for office on the promise to lower the deficit, but the White House just projected that it is on track to reach $1 trillion this year.  That actually is $91 billion less than its March 2019 forecast, but still much higher than when President Obama left office ($665 billion).

This deal may raise it even more.  According to press reports, it boosts total discretionary spending in FY2020 by about $50 billion, to $1.37 trillion.  In FY2021, it will grow to $1.375 trillion.  Defense spending would be $738 billion in FY2020 and $740 billion in FY2021.  Non-defense spending would be $632 billion in FY2020 and $634.5 billion in FY2021.

By comparison, the Trump Administration’s FY2020 budget request was for $750 billion for defense and $567 billion for non-defense.

The Committee for a Responsible Federal Budget exclaimed that the “budget deal may be the worst in history.”

POTUS announces a budget deal has been reached. It may be the worse budget agreement ever https://t.co/gWnPIF8G0b

— CRFB.org (@BudgetHawks) July 22, 2019

Discretionary spending is just one portion of the federal budget. The other two are mandatory spending (e.g. Social Security, Medicare and Medicaid) and interest on the federal debt.  Total federal spending in the last fiscal year (FY2018) was about $4.1 trillion.

Conversely, as the White House statement says, the agreement excludes “poison pills” — policy provisions that pit one party against the other.  Democrats who want to prohibit the Administration from moving funds from one account to another to pay for the border wall may not accept that, and while the deal is more generous to non-defense spending that the Administration’s budget request, it may not be enough to satisfy everyone.  Rep. Alexandria Ocasio-Cortez (D-NY) tweeted her reaction.

Notice how whenever we pursue large spending increases + tax cuts for corporations, contractors & the connected, it’s treated as business as usual.

But the moment we consider investing similar? in working class people (ex tuition-free college) they cry out it’s “unrealistic.” https://t.co/aypyYps9pM

— Alexandria Ocasio-Cortez (@AOC) July 22, 2019

In short, although the mood is hopeful this evening, it is too early to pop the champagne corks.

Note: This article has been corrected to show that the House has not passed two of the 12 appropriations bills (Homeland Security and Legislative Branch).  An earlier version said only the Homeland Security bill was awaiting action.