The Budget Battles to Come

Michael D. Tanner

Don’t look now, but the next big legislative battles of the
Trump presidency may be just a few weeks away. Republicans must
pass a budget by April 28 to avoid a partial government shutdown.
Yet, as was the case during the recent failed effort to repeal and
replace Obamacare, Democrats are united in opposition while
Republicans are badly split.

The looming battle doesn’t concern the 2018 budget that
President Trump purported to unveil a few weeks ago, which will
spark a fight of its own down the road. Rather, it concerns budget
business left over from last year when, unable to pass budget
bills, a lame-duck Congress kicked the can down the road, passing a
continuing resolution to fund the government through the end of
this month. The time on that CR is now almost up, and Republicans
are planning to offer an omnibus budget bill to fund the government
for the rest of the year. To further complicate measures, this
massive omnibus will likely be offered as an amendment to the 2017
defense-appropriations bill.

If Trump thought his
first few months were tough, he’s in for a rude awakening: The next
few will be even tougher.

Perhaps unsurprisingly, given the direction of this Congress and
administration, the most contentious issues are not likely to be
the bill’s massive levels of government spending (it proposes a $15
billion increase from last year) nor the inevitable billions of
hidden pork. Instead, it is smaller side issues that threaten to
derail the effort to keep the government running. For instance, the
Trump administration is insisting on funding to start construction
of — or at least planning for — the wall it wants to
build on our Mexican border, and Democrats, Republican moderates,
and deficit hawks alike are balking. There will also be the usual
face-offs over issues such as defunding Planned Parenthood.

While the actual impact of government shutdowns is always vastly
exaggerated by the media, the optics of a shutdown would only
contribute to the image of an administration in disarray. Yet a
retreat by the administration from its key priorities, especially
in the wake of the health-care-reform debacle, will make it look
weak, imperiling the rest of its agenda.

And if Republicans do manage to paper over their
differences long enough to get through this fight, they will almost
immediately have to face up to another budget issue — the
debt ceiling. The federal government actually exceeded its $18.15
trillion borrowing limit some time ago. But, in a bipartisan
pre-election ducking of responsibility last October, Congress
“suspended” the limit until March of this year. Since then, the
Treasury Department has been engaging in a variety of bookkeeping
gimmicks to avoid default, such as postponing contributions to
government pension funds and borrowing from a pool of funds that
the government sets aside to manage exchange-rate fluctuations.
While the government can probably keep using such “extraordinary
measures” through summer, Congress will eventually have to deal
with the issue. Expect Democrats to suddenly rediscover concern
over the national debt, while the Freedom Caucus has already
indicated that it will want concessions in exchange for agreeing to
raise the ceiling.

After that comes the battle over Trump’s 2018 budget, with its
big increase in defense spending and offsetting cuts to domestic
programs. Almost nobody is enthused by that plan. There’s also the
president’s $1 trillion infrastructure plan to consider. Oh, and
tax reform.

All of this budget maneuvering comes shortly after the
Congressional Budget Office released an alarming new report warning
that the national debt will double as a share of the national
economy by mid-century. Interest payments on the debt will rise
from $270 billion in 2017 to $768 billion in 2027, with
catastrophic consequences for President Trump’s agenda of economic
and job growth. According to the CBO, the rising tide of red ink
will shrink economic growth by 3 percent from the current baseline.
As a result, the average American will be $4,000 poorer by
2047.

Trump has had a tough first few weeks in office; if he thinks
it’s about to get easier, he’s in for a rude awakening.

Michael
Tanner
is a senior fellow at the Cato Institute and the author
of Going for Broke: Deficits, Debt, and the Entitlement
Crisis
.

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