Federal Budget Would Raise Spending by $320 Billion

WASHINGTON — White House and congressional negotiators reached accord on a two-year budget on Monday that would raise spending caps and lift the government’s debt ceiling, likely averting a fiscal crisis but splashing still more red ink on an already surging deficit.

If passed by Congress and signed by President Trump, the deal would stop a potential debt default this fall and avoid automatic spending cuts next year. The agreement would also bring clarity about government spending over the rest of Mr. Trump’s term.

But it is another sign that a Capitol once consumed by fiscal worries simply no longer cares — even as the government’s red ink approaches $1 trillion a year.

“It’s pretty clear that both houses of Congress and both parties have become big spenders, and Congress is no longer concerned about the extent of the budget deficits or the debt they add,” said David M. McIntosh, president of the Club for Growth, a conservative group that advocates for free-enterprise.

The agreement, struck by Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, would raise spending by $320 billion, compared to the strict spending levels established in the 2011 Budget Control Act and set to go into effect next year without legislative action. Spending on domestic and military programs would increase equally, a key demand of Ms. Pelosi, offset by about $75 billion in spending cuts, far lower than the $150 billion in cuts that some White House officials initially demanded.

The deal would lift the debt ceiling high enough to allow the government to keep borrowing for two more years, punting the next showdown past the 2020 elections. The negotiators hope to enact the accord before Congress leaves for its August recess.

The president said he was pleased with the added military spending and made no mention of the mounting deficits that he and Republicans once railed against.

The deal is a coup de grâce for the Budget Control Act of 2011, which President Barack Obama signed into law after House Republicans, led by the current acting White House chief of staff, Mick Mulvaney, pushed the government to the brink of defaulting on its debt. The law, once seen as the Republicans’ crowning achievement in the Obama era, set strict spending caps, enforced with automatic spending cuts.

But since 2014, a succession of budget deals has waived the Budget Control Act caps, and the new deal not only lifts them again but allows the whole law to expire in 2021.

Meantime, the federal debt has ballooned to $22 trillion. Despite healthy economic growth, the federal deficit for this fiscal year has reached $747 billion with two months to go — a 23 percent increase from the year before.

“It appears that Congress and the president have just given up on their jobs,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which blasted out a statement arguing the tentative deal “may end up being the worst budget agreement in our nation’s history.”

“The economy is great and able to accommodate changes,” she said in an interview. “But we’re about to make things worse due to nothing other than the lack of political will.”

The rising costs of an aging population, with the baby boom generation drawing 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 Mr. 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, Mr. Trump has overseen both a binge in discretionary spending and a plunge in expected tax revenues as a result of the tax cut legislation that stands as his signature legislative achievement. The federal budget deficit has increased by an average of 15 percent for each fiscal year he has been in office. (Mr. Obama ran large deficits in his first term in the wake of the 2008 financial crisis. But his second term saw deficits fall by an average of 11 percent per fiscal year.)

In that first Obama term, which included a large government stimulus package to jump-start job creation in the depths of the recession, discretionary spending on military and domestic items rose by about 3 percent per year, on average. In his second term, such spending declined by an annual average of nearly 2 percent.

Mr. Trump is currently on pace to increase discretionary spending by an average of nearly 4 percent per year.

Mr. Trump’s tax cuts, which reduced rates for businesses and individuals, have not paid for themselves, as some administration officials said they would. Instead, they have reduced individual and corporate tax revenues by about 8 percent per year, compared to what budget forecasters expected 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.

But Democrats are not inclined toward austerity either. In the first round of Democratic presidential debates, the national debt was barely mentioned.

Still, passage of the budget agreement is not certain. Ms. Pelosi and Mr. Mnuchin, who have led the negotiations in private phone calls over the last week, will have to sell the deal to their parties ahead of an anticipated House vote this week, before that chamber leaves on Friday. The Senate is scheduled to leave for its recess next week.

In her caucus, Ms. Pelosi must wrangle votes from both her fiscal hawks and liberal members opposed to increased military spending. Mr. Mnuchin must secure the president’s signature and wave off critics of government spending such as Mr. Mulvaney.

But the threat of an economically disastrous default on the nation’s debt, coupled with widespread desire to avoid automatic cuts to military and domestic programs, are likely enough for the proposed measure to become law.

“I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge,” Mr. Trump said on Friday. “We can never play with it.”

Once a deal is enacted, lawmakers have to race to agree on how to allocate the money before Oct. 1, when current spending laws expire.

Meantime, the deficit hawks are getting more disheartened.

“Everybody getting what they want is not bipartisan compromise, it’s irresponsible policymaking that harms the next generation,” said Michael Peterson, chief executive of the Peter G. Peterson Foundation, an advocacy group for debt reduction.

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