Winners and Losers of the Bipartisan Budget Agreement

Yesterday, President Trump and congressional leaders announced a deal to extend the debt ceiling for two years and raise the Budget Control Act spending caps for two years, avoiding $126 billion in automatic across-the-board cuts set to take effect in January of 2020. This $320 billion deal builds on the last pact, which raised spending by $296 billion. While this agreement represents a surprising breakthrough, this was the easy part, and much work remains to actually pass 12 appropriations bills. Most importantly, the president has yet to announce his explicit support of the accord, and he will gauge public reaction before doing so. Congressional leaders must now figure out how to thread the needle of packaging appropriations bills.

Winners

Speaker Pelosi: The leader of the Democratic House played a bad hand into a good deal; in one conservative’s take, she “played [Mnuchin] like a fiddle.” Beyond avoiding sequestration and a debt ceiling showdown, the speaker desired a significant increase in non-defense discretionary spending — and she delivered in spades. With the addition of $22 billion in unpaid VA bills, Pelosi and Democratic leadership can now credibly claim to have broken the longstanding principle of “parity” in budget deals in which each dollar for defense is matched on the non-defense side.

Mitch McConnell: With the prospect of chaos looming, the Senate majority leader always wanted stability above all else. This arrangement buys him that stability, avoiding a sequester, a shutdown, or a one-year continuing resolution and further budget games, as Acting White House Chief of Staff Mick Mulvaney and OMB Director Russ Vought wanted. McConnell also shields his caucus from a brutal standalone debt ceiling vote and retains the option to disavow the handshake agreement, calling it the “Administration-Pelosi” deal. In addition, by extending the debt ceiling for two years rather than a short-term extension or an elimination, McConnell plays the long game. The new July 2021 debt ceiling deadline sets up either a chance for a newly re-elected Trump to work with Senate Republicans on a true debt reduction pact or to force a Democratic president to squander the most valuable first-term political capital.

Fiscal hawks: The reaction from fiscal hawks can be summed up by Rep. Mark Walker’s tweet featuring the Joker standing next to a pile of money on fire. Many House Republicans and Senate GOP deficit hawks said voting for the massive increases in non-defense discretionary spending in the last budget agreement clocked in as the worst vote of their tenures in Congress. This deal is simultaneously larger than the last one and possesses fewer offsets, leading the deficit-battling Committee on a Responsible Federal Budget to brand it “the worst budget agreement in our nation’s history.”

Progressives: Left-leaning Democrats in Congress aren’t thrilled about this agreement because it includes a verbal agreement from Speaker Pelosi to eschew using poison-pill policy riders in appropriations bills to restrict the president’s latitude on border wall issues. Progressive Dems in the House are still smarting after a betrayal by Senate Minority Leader Schumer on the humanitarian aid package for the border, which included no restrictions on the administration. After helping to pass the National Defense Authorization Act on party lines — a bill most progressive never vote for — they’re unlikely to go quietly into that good night.

Meh

Defense hawks: Without a confirmed defense secretary to provide a strong voice in the room, defense spending was not a priority for White House negotiators. Leading defense hawks, such as Sen. Jim Inhofe and Rep. Mac Thornberry, had called $750 billion the bare minimum to carry out the president’s National Defense Strategy. This budget deal provides $738 billion in 2020, only $5 billion more than the House Democrats’ preferred level and about 1% real growth. In 2021, the $741 billion defense budget will actually represent a decrease in buying power, given inflation. However, defense hawks notched a win in avoiding a one-year continuing resolution or across-the-board cuts to the military twice the size of the 2013 sequester, which devastated readiness. Sen. Inhofe and Rep. Thornberry have already announced their reluctant support of the deal to maintain momentum on readiness recovery, but this deal was a pyrrhic victory for defense hawks.

The President: Facing advisers split on a negotiating strategy, the president tentatively agreed to a compromise, which he could ditch at any moment. The Mnuchin wing avoids a potential default and sequestration, while the Mulvaney/Vought wing sets up a premier fiscal fight early on in a second term, should the president win next November. The president also retains his freedom on his number-one issue — the border wall — with transfer authority intact and a promise from Pelosi to ban immigration-related policy riders on appropriations bills.

Rick Berger is a research fellow at the American Enterprise Institute (AEI), where he works on the defense budget, the National Defense Authorization Act, military appropriations and acquisition reform, as well as on other national security budget-related issues.

Follow Rick on twitter: @bergerrichard

This article appeared originally at American Enterprise Institute (AEI).