Quick Hit – July 23, 2019

The Budget Deal and Debt Ceiling Agreement Reached!

A deal has been reached between the White House and House Democrats to lift budget caps and increase the debt ceiling for two years. The agreement will allocate $738 billion for defense spending and $632 billion for non-defense spending in FY20 and $740 billion for defense and $634 billion for non-defense in FY21. The President had originally requested $750 billion for defense spending and $567 billion for non-defense spending in FY20.

Secretary of the Treasury Steven Mnuchin

Although the newly agreed defense levels are lower than originally requested in FY20, the tradeoff in having at least two years of stability is recognized by Defense committee and subcommittee leadership as a worthwhile tradeoff. These spending levels represent a three percent increase over the FY19 numbers for defense and four percent increase for non-defense spending.

What the Deal Means

House Speaker Nancy Pelosi

Now that Congress and the White House have come to an agreement, appropriations legislation should be less politically charged allowing easier negotiation and conferencing of bills and reducing the likelihood of a budget showdown in the fall. Due to the limited number of legislative days remaining in the fiscal year, there will likely be a short-term CR required for some departments and agencies. With budget top lines agreed, the Senate can resume passing appropriations bills to be conferenced with the House. Appropriations leadership has indicated it will attempt to move the largest bills, such as defense, first. Being a two-year budget deal, it is likely that the FY21 appropriations bills will proceed more smoothly.  Finally, with the debt ceiling relief, that issue is now off the table as a political concern during the runup to the 2020 elections.

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