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Weighing the Good and the Bad in the Spending Caps Deal

From the Thursday Morning Jolt…

Weighing the Good and the Bad in the Spending Caps Deal

Let’s start with the good news about the “spending caps deal”…

Finally, a substantial boost to the Pentagon’s budget. Yesterday I mentioned Defense Secretary James Mattis’ complaint that funding the government through continuing resolutions was eating away at the Pentagon’s ability to make long-term spending decisions. Mattis sounds genuinely pleased with this deal:

…steep increases in U.S. defense spending over the next two years — up more than 15 percent in 2018 alone, the largest boost in more than a decade and a half.

The full agreement remains to be hammered out between the House and Senate, but Defense Secretary James Mattis pronounced himself “very happy with $700 [billion] for this year, and $716 [billion] for next.”

This adds up to the biggest increase in defense spending since 2003.

The domestic spending is mostly aimed at genuine national priorities. Republicans dislike “increased domestic spending” in general, but once you see the specifics, you understand why Republican leaders signed off on it: $80 billion in disaster relief funding, $6 billion toward opioid and mental health treatment, $4 billion to the Veterans Administration to rebuild and improve veterans hospitals and clinics, $2 billion toward research at the National Institutes of Health. These are popular programs and broadly-supported national priorities.

Remember the so-called “death panels”? They’re gone, repealing another key and unpopular component of Obamacare. It was always a stretch to claim that Republicans had “basically repealed Obamacare” just by repealing the individual mandate. But getting rid of the individual mandate and the Medicare Independent Payment Advisory Board? Now we’re getting somewhere. The IPAB board was created under Obamacare and given the duty to slow the growth of Medicare spending, but no board members were ever nominated. But as written under the law, IPAB would have enjoyed a lot of power over what Medicare was willing to pay for and how much, with little opportunity for Congress to overrule their decisions. This deal gets rid of IPAB for good.

Democrats have once again failed to use the threat of a government shutdown to get a DACA fix on their terms, for the second time in two months. In the eyes of the pro-amnesty lawmakers, this is a surrender. Rep. Luis Gutierrez, Illinois Democrat, is livid, declaring yesterday, “if Democrats join with Republicans on this deal and lift the caps, what you will have is a collusion with Donald Trump to deport Dreamers.”

It avoids a government shutdown. You know my perspective; no one ever “wins” a government shutdown. Democrats looked at polling numbers on DACA immigrants and thought Americans would support a government shutdown over them. Nope. President Trump thinks Americans will support a government shutdown over border security. Probably not. As soon as the government shuts down and Americans start seeing images of kids on a field trip finding the doors of the Smithsonian locked, they start to respond, “those idiots, why can’t they keep the government open? A pox on both your houses.”

The bad news about the deal…

This is a big spending increase, when the debt is $20 trillion and we’re starting to approach the risk of trillion-dollar-per-year deficits again. The biggest spending increase since 2009, in fact. (It is fair to remember that Donald Trump did not run as a fiscal conservative.)

We just don’t care about deficits and the debt anymore, do we?

I should point out one dollop of budgetary good news: In January, tax revenues… are up, about five percent higher than they were a year ago. Now, not all companies had implemented the payroll withholding in January, so this month and coming months may see lower revenue than the preceding year. But as Investor’s Business Daily put it, “Those 3 million-plus workers who are getting bonuses and raises thanks to the Trump tax cuts will end up paying more in taxes on those extra earnings, offsetting at least some of the tax cuts they will enjoy this year.”

The editors focus on the opportunity cost of this deal:

This is a bad deal. It is a bad deal because it hikes domestic spending. It is a bad deal, as well, because it may end the chance for a conservative legislative achievement in 2018.

A two-year spending deal means Republicans probably won’t go to the trouble of passing a formal budget for 2019. That would mean no chance for a so-called reconciliation process that could allow them to enact meaningful legislation with only 50 votes in the Senate. If Republicans accept this deal and then forgo the reconciliation process, they will have given up their chance to pass a law without Democratic support, and measures such as easing the Obamacare regulations that will contribute to higher premiums in the coming years or reforming welfare will stand no chance of making it through Congress. With this deal, Republicans are hurting the chance to add to their ledger of accomplishments prior to November.



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