Congress Strikes Two Year Budget Deal — But at What Cost?

The federal government briefly shut down and reopened Friday morning as lawmakers finalized a two-year spending agreement. The spending package lifts budget caps on defense and nondefense spending, lifts the debt ceiling, and includes disaster relief for regions affected by hurricanes and other natural disasters.

In a win for defense hawks, the agreement provides an additional $165 billion in defense spending over current budget caps over the next two years. The measure also provides the military with appropriations for the remainder of FY 2018.

Defense Details Chart - Feb 2018

Earlier this week, Secretary of Defense Jim Mattis outlined the dire consequences of passing another continuing resolution.

In testimony before the House Armed Services Committee, Mattis said a fifth continuing resolution for the year would mean the services would be unable to recruit the 15,000 Army and 4,000 Air Force troops it needs this year.

In a bit of historical irony, current statutory budget caps were imposed as part of the 2011 Budget Control Act, which also hiked the debt ceiling. To suspend the debt ceiling through March 2019, Congress now must lift the sequestration spending caps.

But the agreement comes with some very real costs.

To help offset the cost of the deal, Congress extended sequestration for an additional two years, out to 2027.

The deal includes a provision establishing a “Joint Select Committee on Budget and Appropriations Process Reform,” which seeks to “significantly reform the budget and appropriations process.”

A similar super committee was established in the 2011 budget law. That committee, tasked with reducing $1.5 trillion from the deficit, led to sequestration. There's a very real possibility this new super committee could come up with something similar - or worse.

The second cost of the budget deal is the national debt. The budget deal assumes federal spending in two years will return to previously agreed on levels. In reality, these new numbers will be the baseline for future government spending. Coupled with nondefense spending increases, the nonpartisan Congressional Budget Office projects the budget deal would increase next year's deficits to roughly $1.2 trillion; annual deficits would remain over $1 trillion indefinitely.

With recently passed tax reform legislation, there will be less revenue coming into the federal government, meaning the debt will grow more quickly than previously estimated.

In November 2017, three former secretaries of defense sent a joint letter to congressional leadership, warning, “In the absence of a comprehensive budget that provides essential fiscal discipline on entitlement spending, and enforces a tough 'pay-go' requirement that pays for both additional spending and tax relief, the burden of increased future debt will fall - as it always does - on the discretionary accounts of the federal budget, with the largest being defense and national security.” 

 

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