Budget Deal Moving Ahead, Despite Outrage on the Right
The bipartisan deal to suspend the debt ceiling and increase federal spending over the next two years will get a vote in the House on Thursday, House Majority Leader Steny Hoyer (D-MD) said late Tuesday. Leaders in both parties have expressed confidence that the bill will pass before lawmakers leave town for their August recess.
"We're gonna pass it," Hoyer told reporters. "I think we'll get a good number [of votes]. I don't know if it's gonna be huge, but we're gonna pass it."
President Trump announced that he backs the deal, removing one possible hurdle for the bill. “Budget Deal gives great victories to our Military and Vets, keeps out Democrat poison pill riders. Republicans and Democrats in Congress need to act ASAP and support this deal,” he tweeted Tuesday evening.
Despite widespread agreement that the bill will pass, however, not everyone is on board.
Grumbles from the left: Some progressive Democrats have been critical of the deal, portraying it as too easy on Republicans. Worried that the agreement could set up a budget crisis in 2021, Rep. Ro Khanna (D-CA) said he was “concerned that it was a two-year deal. Why not a one year deal?... It seems like it’s basically handcuffing the next president.” Other liberals, noting that Democratic leaders have agreed to avoid “poison pill” riders on controversial issues such as abortion and funding for the border wall in the funding bills that must pass this fall, lamented their loss of leverage in those negotiations.
Outrage on the right: Resistance to the deal was more pronounced on the right, with the hardline House Freedom Caucus announcing Tuesday that it would not support the bill due to concerns about the growing national debt. “Our country is undeniably headed down a path of fiscal insolvency and rapidly approaching $23 trillion in debt. … All sides should go back to the drawing board and work around the clock, canceling recess if necessary, on a responsible budget agreement that serves American taxpayers better—not a $323 billion spending frenzy with no serious offsets,” the 31-member group said in a statement.
The deficit hawks at the Committee for Responsible Federal published “Five Reasons to Oppose the Budget Deal,” which include its purported $1.7 trillion cost over 10 years. CRFB noted that the agreement would increase discretionary spending by 21 percent during President Trump’s first term, pushing such spending to near-record levels.
Sen. John Kennedy (R-LA) was more colorful in his criticism, saying, “You don’t have to be Euclid to understand the math here. We’re like Thelma and Louise in that car headed toward the cliff.” Nevertheless, Kennedy said he would consider supporting the deal.
Is the deficit hawk dead? The budget deal represents “the culmination of years of slipping fiscal discipline in Washington,” said Robert Costa and Mike DeBonis of The Washington Post, and it highlights the declining influence of fiscal conservatives in the capital, at least as far as policy is concerned. Sen. James Lankford (R-OK) said the Republican Party’s credibility on fiscal restraint is “long gone.”
Although it may be too early to declare the fiscal hawk extinct – plenty of critics say the bird will return as soon as there’s a Democratic president – it certainly seems to be in ill health. As the University of Virginia's Larry Sabato said Wednesday: “A battered bird has been named to the list of endangered species. The ‘deficit hawk’ is on the road to extinction. Rarely spotted around Washington, D.C., the deficit hawk’s last remaining habitat is found in some state capitals.”
Some Republicans said that fiscal conservatism was never really a core Republican value, dating back to President Reagan’s tax-cut-and-spend policies, and that Paul Ryan’s emphasis on fiscal issues was an aberration. “It was never the party of Paul Ryan,” former House Speaker Newt Gingrich told the Post. “He’s a brilliant guy, but he filled a policy gap. The reality here is that Republicans were never going to get spending cuts with Speaker Pelosi running the House, and they didn’t want an economic meltdown or shutdown this summer.”
Is the whole debate missing the point? William Gale of the Brookings Institution, who served on President George H.W. Bush’s Council of Economic Advisers, said he wasn’t sure why the budget deal was producing so much hostility, since it basically maintains the status quo and – more importantly – is focused solely on discretionary spending. “There *is* a long-term budget issue,” Gale tweeted Tuesday, “but cutting [discretionary spending] is not the way to go.”
Instead, Gale says that any serious fiscal plan must focus on the mandatory side of the ledger, where the rapidly increasing costs of health care and retirement are straining against revenues reduced by repeated rounds of tax cuts. Gale recommends a combination of entitlement reductions and revenue increases – a standard mix of policy options that faces an uncertain future, with well-entrenched interest groups standing opposed to movement in either direction.
Photo of the Day: Kanye West at the White House
This is 2018: Kanye West visited President Trump at the White House Thursday and made a rambling 10-minute statement that aired on TV news networks. West’s lunch with the president was supposed to focus on clemency, crime in his hometown of Chicago and economic investment in urban areas, but his Oval Office rant veered into the bizarre. And since this is the world we live in, we’ll also point out that West apparently became “the first person to ever publicly say 'mother-f***er' in the Oval Office.”
Trump called Kanye’s monologue “pretty impressive.”
“That was bonkers,” MSNBC’s Ali Velshi said afterward.
Again, this is 2018.
Chart of the Day: GDP Growth Before and After the Tax Bill
President Trump and the rest of the GOP are celebrating the recent burst in economic growth in the wake of the tax cuts, with the president claiming that it’s unprecedented and defies what the experts were predicting just a year ago. But Rex Nutting of MarketWatch points out that elevated growth rates over a few quarters have been seen plenty of times in recent years, and the extra growth generated by the Republican tax cuts was predicted by most economists, including those at the Congressional Budget Office, whose revised projections are shown below.
Are States Ready for the Next Downturn?
The Great Recession hit state budgets hard, but nearly half are now prepared to weather the next modest downturn. Moody’s Analytics says that 23 states have enough reserves to meet budget shortfalls in a moderate economic contraction, up from just 16 last year, Bloomberg reports. Another 10 states are close. The map below shows which states are within 1 percent of their funding needs for their rainy day funds (in green) and which states are falling short.
Chart of the Day: Evolving Price of the F-35
The 2019 National Defense Authorization Act signed in August included 77 F-35 Lightning II jets for the Defense Department, but Congress decided to bump up that number in the defense spending bill finalized this week, for a total of 93 in the next fiscal year – 16 more than requested by the Pentagon. Here’s a look from Forbes at the evolving per unit cost of the stealth jet, which is expected to eventually fall to roughly $80 million when full-rate production begins in the next few years.
Wages Are Finally Going Up, Sort of
Average hourly earnings last month rose by 2.9 percent from a year earlier, the Labor Department said Friday — the fastest wage growth since the recession ended in 2009. The economy added 201,000 jobs in August, marking the 95th straight month of gains, while the unemployment rate held steady at 3.9 percent.
Analysts noted, though, that the welcome wage gains merely kept pace with a leading measure of inflation, meaning that pay increases are largely or entirely being canceled out by higher prices. “The last time unemployment was this low, during the dot-com boom, wage growth was significantly faster — well above 3.5 percent,” The Washington Post’s Heather Long wrote. The White House Council of Economic Advisers this week issued a report arguing that wage gains over the past year have been better than they appear in official statistics.