Blockbuster Budget Deal of 2018 (Feb. 9)

Update 249 — Blockbuster Budget Deal of 2018
Leaps Tall Sequester in a Single Bound

We break down top lines and baselines and look at the agreement — the the key departures from budget making practice — from the perspective of broader fiscal policy.

Good weekends, all.

Best,

Dana

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Breakdowns for top lines are as follows:

• FY 18:
  • Defense: $700 billion in total defense funding, including $66 billion in OCO funding.
  • Non-Defense: $591 billion, including $12 billion in OCO funding.
  • This represents a $80 billion increase in defense spending caps and a $63 billion increase in non-defense spending caps for FY 18.
• FY 19:
  • Defense: $716 in total defense funding, including $69 billion in OCO funding.
  • Non-Defense: $605 billion in total non-defense spending, including $8 billion in OCO funding
  • This represents a $85 billion increase in defense spending caps and a $68 billion increase in non-defense spending caps for FY 19.

These increases in funding will only go into effect when, and if, Congress passes the full-year omnibus appropriations bill.  Now begins a six-week scramble to figure out how to appropriate this new money across the government.

Appropriators do have some constraints to work with. The budget deal includes instructions to spend $3 billion to combat the opioid crisis, $10 billion on infrastructure, $2 billion on higher education, and $2.9 billion on childcare. It also provides $90 billion for emergency disaster relief, a 10-year Children’s Health Insurance Program (CHIP) authorization, and suspends the debt ceiling until March 2019 as opposed raising the limit by a specific amount, a decades-long congressional practice.
GOP Fiscal Responsibility AWOL

The bill increases the deficit by $300 billion in FY18 and FY19, which guarantees the FY19 deficit will exceed $1 trillion for the first time since the Great Recession.  Deficit hawks in both the Senate and the House, including Sen. Rand Paul and House Freedom Caucus Chair Mark Meadows expressed concern over this.  Yesterday, Sen. Paul spoke on the Senate floor slamming colleagues for “hypocrisy,” fiscal profligacy, and the lack of a fair and open process.

In the House, members of the Freedom Caucus also withheld their votes over the $300 billion deficit increase. This increase is widely feared to a step toward a Republican effort to cut social safety net programs such as Medicare and Medicaid.

DACA Goes Wanting

The deal comes in the wake of last month’s three-day shutdown and featured a similar showdown over the fate of the Deferred Action Childhood Arrivals (DACA) program. DACA went unaddressed yet again this time around, but Senate Leader McConnell pledged to move a DACA bill with an open amendment process starting next week.  House Speaker Ryan pledged to address the issue, but stopped short of promising what it would look like or if amendments would be allowed.
How the Deal Came About 

SenateOn Wednesday, Minority Leader Schumer joined with McConnell to announce that the Senate had reached an unusually long two-year budget deal to avoid a shutdown. The two leaders urged their respective caucuses to support the deal. A DACA deal was not attached, per se. The Senate agreement does fund several critical programs including community health centers, a key Democratic negotiating point. The deal ends the sequestration of the military, a central goal of Republican negotiators.

Sen. McConnell’s assurance that immigration would be the next legislation taken up was enough to bring some Democrats on board. The Senate pronounced this as the best deal that they could agree on before the deadline and told the House to accept it or shutdown the government.

HouseOn Tuesday, the House passed its own short term spending deal that would have punted the CR deadline to March 23.  It passed 245-182 on a party line vote that saw few defectors.  Many on the far right were weary of another short-term spending deal that increased the deficit by $300 billion.

Inspired by Leader Pelosi’s eight hour “filibuster,” many Democrats voted against that deal because there were no assurances that the House would have a debate on DACA from Speaker Ryan.

Speaker Ryan sent his whips out to gather a count and by early Thursday morning declared that there were enough votes to pass the two-year Senate spending bill.

How it Passed

After the delay caused by Senator Paul, the Senate passed the bill around 2 am by a 71-28 vote.  Many of the Nay votes came from the more progressive Democrats “2020 caucus” —Sens. Booker, Gillibrand, Harris, etc as well as far right Republicans like Paul.  After a brief House Rules Committee hearing an hour later where an amendment adding DACA protections was rejected by House Republicans the full House passed the bill, 240-186, just before dawn. President Trump then signed the legislation, ending the five-hour government shutdown.

Next Steps

There are two critical indicators for how Democrats will come out of shortest shutdown ever. Expect progressives and immigration activists to revolt at the apparent deferral yet again of the DREAMers agenda, not forcing the issue, using their votes or acquiescence on budget as a hostage.

That fervor might be tamed by Monday when the Senate votes to invoke cloture on the immigration vehicle bill. Assuming Sen. McConnell keeps his word and holds his caucus together, he will allow a decent immigration bill to pass the Senate, and all eyes will be on Paul Ryan. House Republicans have not made any agreements to compromise on immigration and Ryan has expressed an unwillingness to violate the “Hastert Rule” without a shutdown looming. Ryan may ignore Democrats and DREAMers alike.

While appropriators scramble to pull together a spending scheme for the newly expanded budget top lines, Democrats may rip Congress apart if the promise to the DREAMers is not kept.