New Spending Deal Worse Than Obama’s Deals
Daniel Davis / Rachel del Guidice /
Congress is staring at a massive spending deal reached by President Donald Trump and House Speaker Nancy Pelosi—one that’s left fiscal conservatives deeply concerned. Today, we unpack the details and discuss how the bill matches up with spending levels under President Barack Obama. We’re joined by Heritage Foundation budget expert Justin Bogie. Plus: Rep. Rashida Tlaib, D-Mich., defends boycotting Israel on the House floor.
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Daniel Davis: Congress is looking at a massive new budget deal, one that has left conservatives a bit dismayed. Joining us now to unpack the deal is Justin Bogie. He’s a senior policy analyst in fiscal affairs here at The Heritage Foundation. Justin, thanks for being back on.
Justin Bogie: It’s good to be with you. It seems like the only time I’m ever here is under bad circumstances. But it’s good to be with you, nonetheless.
Davis: Yes, it’s unfortunate. This week, the Trump administration came out in support of this budget deal with Speaker Nancy Pelosi. It would suspend the budget caps for two whole years while raising spending considerably. What’s your big picture take on this?
Bogie: Right. You’re exactly right. This is another Budget Control Act cap deal. We’ve had the Budget Control Act in place since 2011 set caps on discretionary spending, and this is now the fourth deal to raise those caps. This one raises them by $322 billion over two years. That’s the base funding.
There’s some other things like war funding thrown into that, but that’s the base. Then it also suspends the debt limit for two years—basically meaning that the federal government can borrow as much as it wants to through July 31, 2021, with nothing to restrict them. Just a lot of additional deficit spending, and additional debt that’s going to be added on for taxpayers.
Rachel del Guidice: Justin, this deal is quite different from the president’s budget proposal, which would have raised defense spending while considerably rolling back domestic spending. What are some of those major concessions you find most concerning?
Bogie: Well, there’s really not much good coming out of the deal if you care about the national debt, if you care about the budget. The president has put forward three budgets now. The first one balanced, the other two still significantly cut the size of the federal government. They didn’t balance, but they did make some progress.
Even on the defense side, this really isn’t a move in the right direction. The 2020 figure is pretty good, but they’re only getting a 0.3% increase in 2021. Really it’s not even keeping up with inflation for national defense. And our team here certainly thinks that’s unacceptable.
Then another $150 billion or so in domestic spending. We feel like a lot of those programs shouldn’t be in the federal government’s purview in the first place. They would be better run by state and local governments, the private sector.
Really everyone’s getting an increase under this bill, and it’s touching a lot of things that really we shouldn’t be in the business of doing anyway.
Davis: Conservatives were up in arms about big spending deals under President Obama—big spending, especially those first couple of years in office. How does this spending bill match up with what we saw under Obama?
Bogie: This is really worse, honestly. And President Trump’s been very critical of President Obama, and President [George W.] Bush before him, and some of the decisions that they made. But in terms of these spending bills, this is much worse. Now, if the president signs this bill, his two budget cap deals will have been over $600 billion.
Obama’s two combined were only about $145 billion or so. Obviously there was some other spending under President Obama. He had the stimulus package after the recession that added on to his debt figures.
But as good as some of the policies that President Trump has put forward have been, they have to be followed through on, and this budget deal is just the complete opposite of that. It’s basically caving to all of these demands.
Davis: And of course, the big contextual difference is that now we’ve got a roaring economy, which should at least be a good time to pull back on the spending, right?
Bogie: Exactly. Typically, when the economy’s going well, you’d be paying down the national debt, and deficits would be lower. And we’re seeing the exact opposite of that. That’s particularly concerning, and a lot of it can be chalked up to the lack of a budget process.
I saw something really interesting this afternoon from Leon Panetta, who obviously was a Democrat, but chairman of the House Budget Committee back in the ’80s, I believe. He had a really good point. Everyone’s praising this, or people who are supportive of this are praising it as a great bipartisan breakthrough. And he said it’s really not a bipartisan breakthrough, it’s just a continuation of budget dysfunction. We’re all really going to be the losers in this.
del Guidice: This more of the same.
del Guidice: This budget deal doesn’t raise the debt limit, it suspends it. Can you talk about the difference there, and why that difference matters?
Bogie: Sure. If you want to raise the debt limit in a fiscally responsible way—and I don’t think anyone wants to flirt with defaulting. That would have a bad impact on the economy, the stock market. But the right way to raise the debt limit is to raise it to an actual value, a number certain, and have corresponding spending cuts to accommodate that additional debt.
That’s what we saw in 2011. That’s how the Budget Control Act came to be. It was in return for a $2.1 trillion increase in the debt limit. We saw corresponding spending cuts. But when you suspend the debt limit, that basically just means it doesn’t exist, so there’s nothing to stop Congress from borrowing as much as it wants to, and the federal government spending as much as it wants to.
Davis: You mentioned 2011, right after the Tea Party wave. Congress passed the Budget Control Act to finally get a grip on spending. Is that act now basically in tatters?
Bogie: It is. For all practical purposes it’s dead. The caps only run through 2021. There’s a mandatory component that’s now been extended through 2029. That will be extended through 2029 if this bill passes. But that only saves about $60 billion or so in the last couple of years.
Basically, the caps are gone. And what happens after 2021 is anyone’s guess. It’s not a very comforting future.
del Guidice: In a piece for The Daily Signal on this, you wrote, “We could soon all pay a heavy price for this irresponsibility.” Can you expand on that a little bit? What kind of price could we end up paying if we continue down this path?
Bogie: Sure. First, I would say that in order to avoid a bad outcome, we should be making reforms now. And what this bill does is it spends now and it doesn’t even pay for it later. It’s just a continuation of delaying reforms and pushing it further down the road.
But there’s a lot of data out there that shows when a country’s debt gets over 90% of [gross domestic product]—which we already are over in terms of gross debt, at least, we’re getting close to it in debt held by the public—that economic productivity slows down. Economic growth slows down, and that translates into less take-home pay for every one of us.
It could also mean that we see inflation creep up, that we see interest rates rise. Basically everything that we buy becomes more expensive, and in general we won’t have as good a quality of life. That’s especially true the longer we delay reforms for our future generations, they’re going to be paying a heavier price than someone who’s 50, 60, 70 years old right now. It’s those who aren’t born yet, or are very young that will pay the big price.
Davis: What would you say is the No. 1 driver of debt long-term?
Bogie: Sure. Well, we’re focused on the discretionary part of the budget here, and it is important certainly from a good government point of view. But really the drivers of debt are the so-called mandatory or autopilot programs, and that’s mainly health care. Medicare, Medicaid, and then Social Security. They’re driving about 75% of the growth in spending over the next decade.
And then you also have interest on the national debt. The more debt that we assume, the higher those interest payments become. Soon we’re going to be paying more on interest on the debt, the national defense. It becomes a safety issue as well.
Davis: If we don’t actually reform those programs, what’s going to happen to them?
Bogie: Well, they’re already on pace to become insolvent. Social Security and Medicaid are both headed that direction. At some point, the government is either going to have to bail them out, which means more debt, or whenever this breaking point is, it’s coming.
We don’t know when, but the only options available to lawmakers at that point are really drastically increasing taxes or cutting benefits for everyone. But this is unsustainable, and that’s the result we’re going to see at some point.
del Guidice: One of the big questions on the conservative side is, how do we restrain spending overall while adequately funding defense? To turn that question over to you: Is there a feasible way for Congress to fund the military adequately while staying within existing cap levels?
Bogie: I think there’s absolutely a way to do that. We have our blueprint for balance that we put out in May. We were at $742 billion in defense funding, which is just under the president’s request. While maintaining, we were actually $40 billion below the overall [Budget Control Act] Caps in 2020. And that’s through getting rid of a lot of these programs that we shouldn’t be involved in, as I mentioned earlier.
There’s absolutely a path to do that. I think the tension here is it’s become this problem of … in order to get more defense spending, we’ve sort of been held hostage for the domestic spending.
That’s why we’ve seen these terrible deals. They keep coming around and at some point, somebody has to hold the line firm and really focus on constitutional priorities like defense and let some of these other things go by.
Davis: We’re starting to see conservatives in Congress line up against this bill. A lot of allies of the president are saying, “We just can’t go with this. It’s just irresponsible.” What do you think the final shakeout is going to be in terms of who votes for this bill and how it passes? If it passes.
Bogie: Yes, it’s always hard to predict that. From what I’ve been reading today, it sounds like Democrats think that they have enough support. Even some of the progressives they thought they might lose are probably going to vote for this. [Senate Majority Leader Mitch] McConnell, I would assume, will be able to cobble enough votes together to get this through.
But you are seeing some pushback on it, and even some Democrats, the Blue Dog caucus, has pushed back against this. They think it should be paid for as do we. I’m sure they would have a different method of paying for it than we would support. But I think it’s good that there are some members on the left that are at least cognizant of the fact that this is really irresponsible.
And I would just also mention this $322 billion price tag that we hear. That’s kind of just the start of it. The Committee for a Responsible Federal Budget did a 10-year estimate of what this would actually cost, and they have it at about $1.7 trillion. By the time you include interest costs and future spending, that will be higher as a result of this.
Davis: Well, it’s a sober moment for conservatives, and we’ll continue to follow the story as it develops. Justin Bogie, thanks for being back on.
Bogie: Yep. Great to be with you.