US Congress passed a bipartisan spending deal on Friday, which unlocks $300 billion in additional spending for the military and domestic programs over the next two years. That comes on top of last year’s $1.5 trillion tax cut package. Spending increases are largely unfunded and will boost the deficit.
Republicans did not have enough votes to get the bill through without at least some Democrat support as a large increase in spending met resistance from Republican fiscal hawks.
The Senate passed the legislation by 71-28, after Republican senator Rand Paul of Kentucky forced a short government shutdown early on Friday by using a parliamentary manoeuvre to prevent a Senate vote before a midnight deadline in an effort to bring attention to the growing deficit. The House voted 240 to 186 to approve the budget. 73 House Democrats voted yes, offsetting the 67 Republicans who voted no.
President Donald Trump’s signature came quickly after the House gave final approval to the deal.
Republicans approved deficit-busting measures, disavowing their commitment to fiscal restraint, which is at the core of the party’s economic policies.
The budget package primarily affects discretionary spending and does not include entitlements like Social Security and Medicare, the real drivers of swelling public debt. It also lifts the federal debt limit until March 2019, pushing any future confrontation over that issue until after the midterm elections, and keeps the government funded for another six weeks, giving lawmakers time to pass a long-term funding package.
The deal does not address the fate of Dreamers, undocumented immigrants brought to the US as young children, who are now shielded from deportation by the Obama-era Deferred Action for Childhood Arrivals program, or DACA. The fate of Dreamers has been in question since President Donald Trump moved in September to end DACA. The Dreamers issue was one of the reasons Democrats initially voted against a short-term spending bill last month, prompting the three-day shutdown.
The sweeping tax overhaul is estimated to reduce federal revenue by about $1 trillion over the next decade when pro-growth economic effects are factored in. Tax cuts and unfunded spending increases put the US on track to the annual federal deficit exceeding $1trillion, a level not seen since the recession and its aftermath. The US public debt burden is expected to reach nearly 100 per cent of the country’s economic output within a decade.
The additional fiscal stimulus, at a time when the economy is already strong, could fuel inflation and translate into higher interest rates more quickly than anticipated. That unnerved financial markets this week, pushing up the 10-year Treasury yield to 2.88 per cent, a four-year high.
Official White House Photo by Shealah Craighead
