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It was, in the words of Politico’s headline writer, “The Dumbest Shutdown Ever.” On Thursday night, Senator Rand Paul—who has suddenly found religion on the deficit again, after voting in December for a trillion-dollar, deficit-funded tax cut—delayed a roll call vote to pass a budget resolution until after the midnight deadline. Meanwhile, Nancy Pelosi rallied House Democrats against the measure—and the Republicans needed their help after the Freedom Caucus, which similarly found that old-time deficit-hating religion after voting for tax cuts, defected—decrying the lack of protection for Dreamers.
- “But ultimately 73 Democrats defied Pelosi and helped Republicans reopen the federal government without a single concession on immigration, the wedge issue in the face-off.”
- The government reopened a few minutes
ago,after Trump signed the bill.
- Quote of the day (from Politico): “‘When Rand Paul pulls a stunt like this, it easy to understand why it’s difficult to be Rand Paul’s next door neighbor,’ said [Pennsylvania Republican Congressman Charlie] Dent, referring to the neighbor who assaulted Paul last year, breaking several of his ribs and sending him to the hospital.”
WHAT THE AGREEMENT DOES
its own terms, the budget deal gave Democrats a lot of what they want, including a lot of things included in their “Better Deal” proposal.
- From WaPo: “In negotiations, Democrats checked off several items in the Better Deal, a compendium of policies backed by Democrats in the past and brainstormed in meetings last spring and summer. The new items include $5.8 billion for the Child Care Development Block Grant program; $20 billion in infrastructure spending, including rural broadband funds, with no corresponding cuts; and a special joint committee on fulfilling pension obligations, with the results to be voted on by the end of the year.”
- Also WaPo: “The U.S. government will spend about $500 billion more over the next two years, the largest increase in federal spending since the stimulus during the Great Recession. … More than 60 percent of the extra funding would go toward military spending, a major Republican priority. The rest would mainly go to disaster relief, health care and other domestic priorities favored by Democrats.”
- The bill funds the government for six weeks, until March 23, giving lawmakers time to craft full appropriations bills. It waives the debt ceiling until March 2019. It allows Congress to spend $500 billion more, mostly from the deficit (more on that in a second). Military spending will increase 10 percent, up to $716 billion in 2019. It boosts domestic funding by 10 percent, to $591 billion this year. (Notice here that we spend much more money on the military than on all domestic items combined.) It allocates $6 billion to fight the opioid crisis. It funds community health center for two years, extends CHIP for four years, and staves off coming cuts to Medicare and Medicaid. It funds abstinence education. It includes $90 billion for disaster relief, of which $16 billion will go to Puerto Rico—far short of the $94 billion the Puerto Rican government says it needs. And it retroactively extends tax cuts to 2017 for green-energy projects, rum producers in Puerto Rico, film-production companies, and people will be allowed to deduct private mortgage insurance and mortgage debt relief.
WHAT IT MEANS: The first problem with this deal, as I mentioned yesterday, is that Dreamers are still left in limbo, as Democrats forfeited their best leverage to force President Trump and Republicans to extend DACA. But just as important is this bill sets up for the coming year.
- NYT: “The two-year budget agreement reached by Senate leaders on Wednesday would contribute hundreds of billions of dollars to federal deficits. … According to a preliminary analysis of the deal, federal deficits would surpass $1 trillion by 2019, a level not seen since the recession and its aftermath. Deficits would grow even more if the policies in the deal were extended beyond 2019. Lawmakers have also promised that individual tax cuts passed in December that
areset to expire after 10 years will be extended, which would put even more pressure on the federal debt.”
- The deficit is exploding in relative boom times, thanks to an economic stimulus in the form of tax cuts and a congressional spending spree, funneling even more hundreds of billions of dollars to a military that already has a bigger budget than its seven closest competitors combined [World Economic Forum]. But Republicans, especially House Speaker Paul Ryan, have spent the last decade scolding Democrats about deficit spending. So how do they square this deal and the tax-cut package with their supposed deficit hawkishness? Simple. Gut Social Security and Medicare.
- From the Washington Times: “House Speaker Paul D. Ryan said Thursday that the budget deal he’s asking members to vote for will rebuild a military hollowed from years of spending restraints, and said shortchanging troops isn’t the answer to an exploding debt. ‘The military is not the reason we’ve got fiscal problems. It is entitlements,’ Mr. Ryan said, blaming the growth of Medicare, Medicaid and Social Security for a deficit that’s likely to top $1 trillion a year for the foreseeable future. Mr. Ryan said he plans to take on those programs—though Senate GOP leader Mitch McConnell and President Trump have already ruled that out.”
- It does seem unlikely that Trump would go after Social Security and Medicare, given how politically fraught the issue is even for popular politicians (and given that his base is composed in no small part of seniors and near-seniors). But even assuming none of those entitlement cuts come to fruition, the rising deficits will put any Democrat who comes into power in 2020 or even 2024 in a bind. Big progressive programs—universal health care, free college, universal basic income—require massive infusions in cash. And because the deficit under Donald Trump is already spiraling out of control, any responsible Democrat would either have to jack up taxes or dramatically scale back his or her ambitions, all the while Republican opponents decry the rising deficits and demand massive spending cuts. It happened after President Obama took office in 2009, even though the world economy was cratering and deficit spending was undeniably the proper course of action. And it’ll happen again, especially if and when the economy—which has now been growing for eight years—hits a recession.