White House and congressional negotiators could announce a budget deal as soon as Monday that lifts spending levels by roughly $320 billion over the next two years and raises the debt ceiling through July 2021, a sharp reversal for White House officials who had sought to slash numerous programs just several months ago.
The agreement was near complete, but officials were still awaiting approval from President Trump. House Democrats hope to pass the agreement by the end of this week in order to send it to the Senate next week, before both chambers go on recess through Labor Day.
Trump sounded positive about the emerging deal when asked about it Monday during an Oval Office appearance with the Pakistani prime minister. Trump said the administration was having “very good talks” with congressional leaders of both parties, and he pointed to the need for a budget that ensures military spending remains robust.
“We are I think doing very well on debt, if you look at debt limit, however you want to define that, but we’re doing very well on that and I think we’re doing pretty well on a budget,” Trump told reporters. "Very important that we take care of our military, our military was depleted and in the last two-and-a half years we undepleted it, OK, to put it mildly, we have made it stronger than ever before. We need another big year.”
The deal replaces spending caps that would have forced many government programs to contract in the next two years. It would follow a two-year spending deal Congress passed in 2018, which greatly increased domestic and military spending and which Trump signed over the objections of conservatives, vowing never to agree to such legislation again.
The pending agreement was largely inked after weeks of talks between House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin. Other senior White House officials, such as acting budget director Russell Vought, had sought to push for spending cuts as part of the deal, people briefed on the talks said. But Democrats refused to budge in recent days, narrowing the White House’s options.
Vought last week had sought $150 billion in cuts to offset the roughly $320 billion in higher spending levels, but officials were only able to agree on $77 billion in accounting changes that most likely won’t reduce new spending at all. These changes pertain to extending caps on Medicare spending in future years and raising certain customs fees.
The reported outlines of the deal angered congressional conservatives who have tried to push for lower spending, but it was unclear if their opposition might be enough to sway the president.
Rep. Mike Johnson (R-La.), who chairs the conservative Republican Study Committee in the House, said he spoke with Trump on Saturday and urged against the deal.
“I encouraged the president that he would have his right flank if he would hold the line and allow us all to do the fiscally responsible thing, and that is limit this out-of-control spending,” Johnson said. “We hope that at the end of the day they’ll do the right thing.”
Trump said last week that the debt ceiling must be increased, and he has also told aides that he plans to have a big fight with Congress over spending levels after the 2020 elections, if he wins. He has not expressed much interest in having budget fights during his first term in office, and spending levels have risen dramatically in the past 30 months.
Thanks in part to increased spending and the GOP tax law Trump signed in 2017, the debt has risen to $22 trillion under his watch. Deficit hawks, whose influence has dwindled in Washington, expressed dismay at more of the same.
“As we understand it, 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. “It may end up being the worst budget agreement in our nation’s history.”
As part of the deal to raise military and spending levels for two years, White House officials were working on an agreement with Pelosi to keep future spending bills largely free of contentious policy provisions opposed by Republicans. One point of contention involved the administration’s authority to transfer money between budget accounts to finance construction of the wall.
Democrats have fought to limit or eliminate the White House’s ability to transfer money in this way, but White House officials have pushed hard to retain the flexibility to do so. The exact resolution was uncertain.
A central focus of the budget agreement would be the suspension of the debt ceiling for two years, forestalling what many budget experts believe would be a catastrophic default. Mnuchin has warned that his agency could run out of money by early September if the debt ceiling isn’t raised by then.
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. Lawmakers will still need to pass new spending bills before the end of September, or they could face the prospect of another government shutdown. But the new deal makes it easier to forge those agreements because they will be locking in a total budget figure far ahead of time.
The agreements on the debt limit and the budget caps had been long sought by lawmakers of both parties but achieving them had been uncertain.
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. The Senate will be in session for an additional week after the House departs and would be able to use the additional time to consider the deal and send it to Trump to sign.
The planned deal would also allow the 10-year spending caps put in place by the 2011 Budget Control Act to expire without having formally restricted government spending. Lawmakers, again and again, lifted or adjusted these caps, as they were set to do one last time under the pending agreement.