Budget Deal Perpetuates Broken Status Quo

The budget deal scheduled for a vote tomorrow gets two things right and nearly everything else wrong.

by Ben Ritz, Director of the Center for Funding America’s Future at the Progressive Policy Insitute

The budget deal scheduled for a vote tomorrow gets two things right and nearly everything else wrong. The main thing it gets right is the need to unshackle domestic public investment that would be subject to an across-the-board cut known as “sequestration” in the absence of legislative action. It also suspends the federal debt limit for two years, which will allow the Treasury Department to continue paying the bills America has already incurred without risking the prospect of a catastrophic default on our debts. What it gets wrong is charging $320 billion in new spending to our national credit card, which will further grow those debts and so perpetuate Washington’s governing dysfunction.

The two-year increase in non-defense discretionary spending — roughly half of which funds critical public investments in infrastructure, education, and scientific research that lay the foundation for long-term economic growth — is welcome news, and identical to what PPI proposed in a draft framework at last month’s fiscal summit. Although the deal includes an increase in defense spending that is slightly higher than what we would have liked, a bloated defense budget was likely going to be the price Democrats had to pay to protect public investments under this president. It is also preferable to the alternative of steep and sudden cuts under sequestration that could have jeopardized national security.

But the fact remains both parties have essentially agreed to punt on fiscal responsibility for another two years. That means more borrowing and more of the nation’s resources diverted from productive public investment to pay interest on a growing national debt. This borrowing represents further evidence that the so-called “conservative values” of the Tea Party that swept Washington in 2011 have been vanquished by the big-debt wing of the GOP led by #DeficitDon today. The original spending caps on discretionary spending — the part of the budget annually appropriated by Congress — were created by The Budget Control Act of 2011 and represented the greatest achievement by Tea Party Republicans in their crusade against government spending.

But those caps were just supposed to be a down payment: the Joint Select Committee on Deficit Reduction (also known as the “Super Committee”) was supposed to identify another $1.2–1.5 trillion of savings from higher revenues or reductions in mandatory spending — the part of the budget that operates on autopilot based on formulas set into law by previous Congresses. The Super Committee’s failure automatically triggered a tightening of the caps to be enforced by sequestration. But while the sequester-level caps were lifted several times throughout the Obama presidency, these increases were largely paid-for and discretionary spending consistently remained far below the original BCA caps.

That all changed after 2016, when Republicans won unified control of the U.S. House, Senate, and presidency. The GOP used its majority in the 115th Congress to not only relieve the ill-conceived sequester but also to increase discretionary spending above the levels originally set by the BCA — without offsetting the cost. This year’s deal is simply a continuation of the GOP majority’s total abandonment of fiscal responsibility in the last Congress (in fact, discretionary spending in Fiscal Year 2021 will actually be lower after adjusting for inflation than it is projected to be in the current fiscal year). It was the previous Congress’s decision to abandon the BCA spending caps, combined with the partisan $2 trillion tax cut Republicans enacted just two months earlier, that cemented our return to trillion-dollar deficits next year.

Of course, Democrats are not blameless for these problems. The refusal of many on the left to entertain even modest changes to large-and-growing mandatory spending programs such as Medicare and Social Security contributed to the fiscal impasse that led to discretionary spending bearing the brunt of deficit reduction. Some now seek to make the problem even worse by expanding Social Security benefits for wealthy seniors and enrolling every American in a Medicare-for-All single-payer system. By exacerbating the nation’s fiscal challenges, these policies would ensure that the next administration struggles against the same pressures that led to deep discretionary spending cuts during the Obama administration. To sustain the increased public investment spending in this week’s budget deal over the long-term, policymakers will need to break the fiscal impasse and find ways to adequately finance our government.

The Progressive Policy Institute has a plan to do just that, which we will release at an event on Capitol Hill hours before the budget deal vote. Our framework gives policymakers over 50 recommendations to pay for this budget agreement and more, allowing them to increase public investment spending by more than 70 percent above current-law projections while putting our national debt on a downward trajectory. We will also be joined by three leaders from the House Blue Dog Coalition who are fighting to ensure fiscal discipline today. Together, we can hopefully make this week’s budget agreement the last one financed with borrowed money for the foreseeable future.

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