Deal Sealed on Federal Budget          07/23 06:19

   President Donald Trump and congressional leaders announced Monday a critical 
debt and budget agreement that's an against-the-odds victory for Washington 
pragmatists seeking to avoid political and economic tumult over the possibility 
of a government shutdown or first-ever federal default.

   WASHINGTON (AP) -- President Donald Trump and congressional leaders 
announced Monday a critical debt and budget agreement that's an 
against-the-odds victory for Washington pragmatists seeking to avoid political 
and economic tumult over the possibility of a government shutdown or first-ever 
federal default.

   The deal, announced by Trump on Twitter and in a statement by Democratic 
House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer, will 
restore the government's ability to borrow to pay its bills past next year's 
elections and build upon recent large budget gains for both the Pentagon and 
domestic agencies.

   "I am pleased to announce that a deal has been struck," Trump tweeted, 
saying there will be no "poison pills" added to follow-up legislation. "This 
was a real compromise in order to give another big victory to our Great 
Military and Vets!"

   The agreement is on a broad outline for $1.37 trillion in agency spending 
next year and slightly more in fiscal 2021. It would mean a win for lawmakers 
eager to return Washington to a more predictable path amid political turmoil 
and polarization, defense hawks determined to cement big military increases and 
Democrats seeking to protect domestic programs.

   Nobody notched a big win, but both sides view it as better than a protracted 
battle this fall.

   Pelosi and Schumer said the deal "will enhance our national security and 
invest in middle class priorities that advance the health, financial security 
and well-being of the American people." Top congressional GOP leaders issued 
more restrained statements stressing that the deal is a flawed but achievable 
outcome of a government in which Pelosi wields considerable power.

   "While this deal is not perfect, compromise is necessary in divided 
government," said House Minority Leader Kevin McCarthy, R-Calif.

   However, it also comes as budget deficits are rising to $1 trillion levels 
--- requiring the government to borrow a quarter for every dollar the 
government spends --- despite the thriving economy and three rounds of annual 
Trump budget proposals promising to crack down on the domestic programs that 
Pelosi is successfully defending now. It ignores warnings from deficit and debt 
scolds who say the nation's fiscal future is unsustainable and will eventually 
drag down the economy.

   "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, a Washington advocacy group. "It may end up being 
the worst budget agreement in our nation's history, proposed at a time when our 
fiscal conditions are already precarious."

   A push by the White House and House GOP forces for new offsetting spending 
cuts was largely jettisoned, though Pelosi, D-Calif., gave assurances about not 
seeking to use the follow-up spending bills as vehicles for aggressively 
liberal policy initiatives.

   The head of a large group of House GOP conservatives swung against the deal.

   "No new controls are put in place to constrain runaway spending, and a 
two-year suspension on the debt limit simply adds fuel to the fire," said 
Republican Study Committee Chairman Mike Johnson, R-La. "With more than $22 
trillion in debt, we simply cannot afford deals like this one."

   Fights over Trump's U.S.-Mexico border wall, other immigration-related 
issues and spending priorities will be rejoined on spending bills this fall 
that are likely to produce much the same result as current law. The House has 
passed most of its bills, using far higher levels for domestic spending. Senate 
measures will follow this fall, with levels reflecting the accord.

   At issue are two separate but pressing items on Washington's must-do agenda: 
increasing the debt limit to avert a first-ever default on U.S. payments and 
acting to set overall spending limits and prevent $125 billion in automatic 
spending cuts from hitting the Pentagon and domestic agencies with 10 percent 
cuts starting in January.

   The threat of the automatic cuts represents the last gasp of a failed 2011 
budget and debt pact between former President Barack Obama and then-Speaker 
John Boehner, R-Ohio, that promised future spending and deficit cuts to cover a 
$2 trillion increase in the debt. But a bipartisan deficit "supercommittee" 
failed to deliver, and lawmakers were unwilling to live with the follow-up cuts 
to defense and domestic accounts. This is the fourth deal since 2013 to reverse 
those cuts.

   Prospects for an agreement, a months-long priority of top Senate Republican 
Mitch McConnell, R-Ky., became far brighter when Pelosi returned to Washington 
this month and aggressively pursued the pact with Treasury Secretary Steven 
Mnuchin , who was anointed lead negotiator instead of more conservative options 
like acting White House Chief of Staff Mick Mulvaney or hardline Budget 
Director Russell Vought.

   Mnuchin was eager to avert a crisis over the government's debt limit. 
There's some risk of a first-ever U.S. default in September, and that added 
urgency to the negotiations.

   The pact would defuse the debt limit issue for two years, meaning that Trump 
or his Democratic successor would not have to confront the politically 
difficult issue until well into 2021.

   Washington's arcane budget rules give each side a way to paint the numbers 
favorably. Generally speaking, the deal would lock in place big increases won 
by both sides in a 2018 pact driven by the demands of GOP defense hawks and 
award future increases consistent with low inflation.

   Pelosi and Schumer claimed rough parity between increases for defense and 
nondefense programs, but the veteran negotiator retreated on her push for a 
special carve-out for a newly reauthorized program for veterans utilizing 
private sector health care providers. Instead non-defense spending increases 
would exceed increases for the military by $10 billion over the deal's two-year 
duration.

   In the end, non-defense appropriations would increase by $56.5 billion over 
two years, giving domestic programs 4% increases on average in the first year 
of the pact, with a big chunk of those gains eaten up by veterans increases and 
an unavoidable surge for the U.S. Census. Defense would increase by $46.5 
billion over those two years, with the defense budget hitting $738 billion next 
year, a 3% hike, followed by only a further $2.5 billion increase in 2021.

   Trump retains flexibility to transfer money between accounts, which raises 
the possibility of attempted transfers for building border barriers. That 
concession angered the Senate's top Appropriations Committee Democrat, Patrick 
Leahy of Vermont, who said he has "many concerns" with a memorandum outlining 
the agreement that promised there will also be no "poison pills," new policy 
"riders," or bookkeeping tricks to add to the deal's spending levels.

   The results are likely to displease some on both sides, especially 
Washington's weakening deficit hawks and liberals demanding greater spending 
for progressive priorities. But Pelosi and McConnell have longtime histories 
with the Capitol's appropriations process and have forged a powerful alliance 
to deliver prior spending and debt deals.

   The measure would first advance through the House this week and win the 
Senate's endorsement next week before Congress takes its annual August recess. 
Legislation to prevent a government shutdown will follow in September.


(KR)