WASHINGTON ― President Donald Trump announced the completion of a deal on spending caps and a higher debt limit on Monday, potentially avoiding the economic brinkmanship and government shutdown headaches that have plagued Congress the last several years.
Agreeing on new spending levels also avoids onerous budget caps that would otherwise snap into place automatically under an Obama-era deal, and indiscriminately slash $126 billion from domestic and Pentagon budgets.
In the final week of negotiation, Pelosi was able to talk the administration down from demanding $150 billion in spending cuts to offset the increases to $75 billion, with the expectation that most of those "offsets" won't actually cut spending.
President Donald Trump and USA congressional leaders reached a deal on Monday on a two-year extension of the debt limit and federal spending caps that would avert a feared government default later this year but add to rising budget deficits.
Pelosi and Schumer celebrated the agreement in a joint statement on Monday, praising the end of the sequester cuts set when Republicans were in the House of Representatives.
Quite a few Democrats were baffled by the development, however, arguing that it gave up any leverage against Trump in Congress while setting up a potential budget battle for a hypothetical Democrat president, should one of their candidates manage to defeat Trump in 2020. Senate measures will follow this fall, with levels reflecting the accord.
Trump said in a tweet that congressional leaders had struck the deal ― with no "poison pill" amendments meant to sink the agreement ― after months of negotiation between Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steve Mnuchin.
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This would translate into a $1 trillion budget deficit by 2020, on top of a national debt of $22 trillion already.
The pact would defuse the debt limit issue for two years, meaning that Trump or his Democratic successor would not have to confront the politically hard issue until well into 2021. This would be the fourth deal since 2013 to bust through the caps. There's some risk of a first-ever US default in September, and that added urgency to the negotiations. But economist Ernie Tedeschi notes that if you look at the deal over two years, the annual spending increases are roughly the same as adjusting actual 2019 spending for fairly low levels of inflation.
Pelosi was positioned to claim rough parity between increases for defense and nondefense programs, but the veteran negotiator retreated on her push for a special carve-out for a newly reauthorized program for veterans utilizing private sector health care providers. President Trump and Democratic leaders announced the deal, which increases spending by $320 billion, according to a congressional aide. It also raises spending by almost $50 billion next fiscal year above current levels.
Trump retains flexibility to transfer money between accounts, which raises the possibility of attempted transfers for building border barriers.
The results are likely to displease some on both sides, especially Washington's weakening deficit hawks and liberals demanding greater spending for progressive priorities. Chuck Schumer of NY, the chamber's Democratic leader, pledged that the House would bring the deal quickly to the floor.
Even with an agreement enacted into law, Congress must pass spending bills to implement it. Lawmakers face a September 30 deadline - the end of the current fiscal year - to pass those bills or temporarily extend current spending while new legislation is brokered.
If the deal is finalized, Pelosi would have less than a week to muscle it through the House before the chamber adjourns for a scheduled six-week summer recess on Friday.