WASHINGTON -- White House and congressional negotiators reached an agreement Monday for a two-year budget that would raise annual spending caps and lift the government's debt ceiling.
The deal, announced by President Donald Trump on Twitter and in a statement by Democratic House Speaker Nancy Pelosi and Senate Democratic leader Charles Schumer, would help clarify government spending over the rest of Trump's term and would build upon recent 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 offers a broad outline for $1.37 trillion in discretionary spending next fiscal year and for slightly more in fiscal 2021. That doesn't include funding for programs such as Medicare and Social Security.
If approved by Congress and signed by Trump, the deal would lift the debt ceiling high enough to let the government keep borrowing for two more years, thereby avoiding a potential debt default this fall. It would also prevent automatic spending cuts next year.
The negotiators hope to gain approval for the accord before Congress leaves for its August recess.
Pelosi and Schumer, in their statement, 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."
They claimed credit for winning more than $100 billion worth of spending increases for domestic priorities since Trump took office.
The agreement struck by Pelosi and Treasury Secretary Steven Mnuchin would raise spending by $320 billion, compared with the strict spending levels established in the 2011 Budget Control Act that were set to go into effect next fiscal year. Spending on domestic and military programs would increase equally, a key demand from Pelosi.
Some White House officials had initially demanded $150 billion in cuts to help offset the spending increases, and they offered Pelosi a menu of savings options worth $574 billion, asking her to decide which ones to include to reach that goal. The compromise suggests that the cuts will actually total about $75 billion.
One of the structural changes included in the administration's offer was a drug-pricing plan that the White House said would save $115 billion. However, a bipartisan group of senators is already working on a separate drug-pricing proposal. The idea of addressing high drug prices is popular with many voters, but Republicans are wary of giving the government a greater role in setting prices.
The White House offer also proposed extending caps on defense and nondefense discretionary spending for fiscal 2021 and 2022 to save another $516 billion. That request has been left out of the final deal, according to two of the people briefed on the discussions.
The president said he was pleased with the added military spending.
Passage of the budget agreement is not certain. Pelosi and Mnuchin will have to sell the deal to their parties before an anticipated House vote this week, before that chamber leaves on Friday. The Senate is scheduled to leave for its recess next week.
Even if a budget-cap deal is enacted, Congress will still need to pass spending bills detailing the outlays within the caps to avoid a government shutdown when the new fiscal year begins Oct. 1. Democratic versions of the annual spending bills have provisions aimed at allowing federally funded groups to promote abortion and at stopping Trump from building a wall on the U.S.-Mexico border.
BUDGET CONTROL ACT
Because the budget deal runs through fiscal 2021, it essentially would kill the 2011 Budget Control Act, which was intended to cut $1.2 trillion in domestic and defense spending through that year.
President Barack Obama signed it into law after Republicans regained control of the House in 2010 and pushed the government to the brink of defaulting on its debt. It was once seen as one of the party's greatest achievements in the Obama era, setting strict spending caps enforced with automatic spending cuts.
But since 2014, a succession of budget deals has waived the Budget Control Act caps. In 2015, after Republicans had regained control of both houses of Congress, senators led by John McCain, R-Ariz., and Lindsey Graham, R-S.C., called for easing the law's across-the-board defense-spending cuts.
In praising Monday's announcement, Trump did not mention budget deficits, which he once railed against and vowed to address as president.
Democrats have not been inclined toward austerity, either. In the first round of Democratic presidential debates, the national debt was barely mentioned, with candidates choosing to focus on countering economic inequality and beefing up government programs.
Critics said the deal was evidence that lawmakers were no longer concerned about budget deficits or the national debt.
"It's pretty clear that both houses of Congress and both parties have become big spenders," said David McIntosh, president of the Club for Growth, a conservative group that advocates for free enterprise.
"This agreement is a total abdication of fiscal responsibility by Congress and the president," added 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."
"The economy is great and able to accommodate changes," MacGuineas said in an interview. "But we're about to make things worse due to nothing other than the lack of political will."
Michael Peterson -- the chief executive of the Peter G. Peterson Foundation, an advocacy group for debt reduction -- said the proposal was disheartening.
"Everybody getting what they want is not bipartisan compromise," he said. "It's irresponsible policymaking that harms the next generation."
The federal debt has risen to $22 trillion. Despite economic growth, the federal deficit for this fiscal year has reached $747 billion with two months to go -- a 23% increase from the year before.
With annual budget deficits at $1 trillion and an annual total budget of about $4.1 trillion, the government is borrowing a quarter out of every dollar it spends. Of the remaining 75 cents, about 9 cents is used to pay the interest for the money the government has previously borrowed.
The rising costs of an aging population, with Social Security and Medicare benefits, and Washington's spending habits have led to increases in both federal spending and interest costs on the growing national debt. During the first two years of the Trump administration, the debt increased by more than $2 trillion, in part because of the 10-year, $1.5 trillion tax cut and large spending increases that Trump signed into law.
The president has repeatedly called for deep spending cuts in the budgets he has submitted to Congress -- then signed several laws that have boosted the deficit even further.
As president, Trump has overseen both an increase in discretionary spending and a plunge in expected tax revenue as a result of the 2017 tax-cut legislation that stands as his signature legislative achievement. The federal budget deficit has increased by an average of 15% for each fiscal year he has been in office.
Critics note that Obama also ran large deficits in his first term, though supporters say he was dealing with the 2008 financial crisis and note that his second term saw deficits fall by an average of 11% per fiscal year.
In that first Obama term, which included a large government stimulus package to jump-start job creation, discretionary spending on military and domestic items rose by about 3% per fiscal year, on average. In his second term, such spending declined by an annual average of nearly 2%.
Trump is currently on pace to increase discretionary spending by an average of nearly 4% per year.
Trump's tax cuts, which reduced rates for businesses and individuals, have not paid for themselves as some administration officials said they would. Instead, individual and corporate tax revenue is running about 8% below projections made before the cuts were passed into law.
Combined with increased costs from paying interest on a larger national debt, the tax cuts are on pace to add nearly $400 billion to the national debt in the course of the 2018 and 2019 fiscal years, according to data from the Congressional Budget Office.
Information for this article was contributed by Emily Cochrane, Alan Rappeport and Jim Tankersley of The New York Times; by Andrew Taylor of The Associated Press; and by Erik Wasson, Saleha Mohsin and Riley Ray Griffin of Bloomberg News.
A Section on 07/23/2019