Trump faces new hit on deficit

President Trump’s record on the deficit is poised to take another hit.

Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin are preparing a spending deal that could add as much as $2 trillion to the national debt over a decade.

Trump has sought to avoid signing additional expensive spending bills ahead of his reelection bid next year, and his team had put forward proposals to reduce domestic spending.

{mosads}But the White House had little leverage to begin with given the Democratic majority in the House, which was dead-set against the spending ceilings suggested by Trump’s administration.

And with the deadline for raising the nation’s debt ceiling moving up, the administration has even less leverage on the budget deal. Mnuchin does not want to risk a default on the nation’s borrowing limit at all costs, and he has been pressing Congress to raise the debt ceiling before leaving for the August recess.

The deal shaping up would set spending ceilings for the next two years, clearing the path for spending measures that will increase the deficit by roughly $75 billion over the next two years.

It’s a bitter pill to swallow for Trump, who campaigned on eliminating the debt and has received rare rebukes from conservative allies over his fiscal policies. Spending bills and tax cuts on Trump’s watch have helped raise the national debt from $20 trillion at the start of his presidency to more than $22 trillion today.

The deal wouldn’t be a total loss for Trump.

If the administration and lawmakers can work out all the details, the deal likely would help prevent any government shutdowns between now and Election Day 2020, and it would also put an end to the debate over the debt ceiling.

It could also pump more money into the economy, helping to fuel economic growth that has boosted Trump’s hopes for reelection.

“The real good for us is two years of stability, which I think is very important to keep the economy moving in the right direction and government function,” said Rep. Tom Cole (R-Okla.), an appropriator. “The last thing you want moving into an election is to shut down government or an economy that’s nosediving.”

An analysis by the Committee for a Responsible Federal Budget estimated that the deal could add $375 billion to deficits over the next decade, compared to current spending levels.

Some Republicans see the rising deficit as a liability.

On Wednesday, Sen. Rand Paul (R-Ky.) blocked an extension of the September 11th Victim Compensation Fund over fears about the debt.

“Any new spending … should be offset by cutting spending that’s less valuable,” he said.

Former Rep. Mark Sanford (R-S.C.) is mulling a primary run against Trump based on concerns over the deficit.

At the same time, the rising red ink underscores the growing reality that lawmakers in both parties generally see little downside in raising the deficit.

Democrats blame Republicans for passing $1.9 trillion in deficit-financed tax cuts and demanding huge increases to defense spending. 

“I think what we need to do is to cut, revoke the tax bill that really only benefited the wealthiest of the wealthy in this nation,” said Rep. Rosa DeLauro (D-Conn.), who chairs the House Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies.

Republicans blame Democrats for demanding dollar-for-dollar increases to domestic spending to match defense increases. 

“We have the age-old problem of Republicans like myself want to see an increasing defense spending and, sadly, Democrats want dollar-for-dollar with that,” said Rep. Chuck Fleischmann (R-Tenn.), the ranking member of the House Appropriations Subcommittee on Homeland Security. 

Fleischmann and Cole argue that the real debt driver is found in entitlement spending that is outside the discretionary spending Congress approves in annual appropriations bills.

“Right now, if you looked at the discretionary budget in FY 2019, we’re spending less on defense and OCO [Overseas Contingency Operations funds] combined than we were in 2010, we’re spending less on nondefense discretionary than we were literally 10 years ago in 2010,” Cole said. “So what that means is, where’s the extra spending coming from? Guess what? Entitlements.”

It’s not completely clear Mnuchin and lawmakers will finish off their deal.

As of Thursday, negotiators had agreed to top-line spending numbers and were working out how much of the spending to offset.

Mnuchin pushed back at reports that the White House was not on board with the way the agreement was shaping up because of the deficit implications.

“I have been having daily conversations with our internal team,” he told CNBC, specifically mentioning that he had spoken to Trump and his acting chief of staff, Mick Mulvaney. 

Members of Congress have viewed Mulvaney, a conservative former congressman who is also the director of the White House Office of Management and Budget, as an obstacle to progress in the talks and were relieved when Mnuchin became the point man.