Burning the midnight oil to reach a $1 trillion budget deal to keep the government running through Sept., 70-year-old Donald Trump proved his “Art of the Deal” still works on Capitol Hill. Former President Barack Obama had an aversion to wheeling-and-dealing in Congress, preferring to call Republicans obstructionists, causing the government shut-down Oct. 1, 2013 to Oct. 16, 2014, tossing some 800,000 federal workers out of work. Republicans, led by Budget Committee Director Paul Ryan (R-Wis.), Senate Majority Leader Mitch McConnell (R-Ky.) and Sen. Ted Cruz (R-Tx.) tried to de-fund Obamacare. When the dust settled, Republicans were blamed for the government shut-down, something they desperately sought to avoid this time around, despite pressure from the House’s ultra-conservative Freedom Caucus looking to once again de-fund Obamacare.
Sen. Chuck Schumer (D-N.Y.) hung tough with the GOP, insisting the spending bill fund included $1.5 billion to beef up border security but not to spend one nickel on Trump’s border wall. Trump got $12.5 billion for the Pentagon, less that half of the $30 billion sought by the White House. Schumer prevailed on Trump when it came to funding Planned Parenthood and so-called sanctuary cities something Trump insisted on. Unable to get the government to fund Obamacare subsidies, Schumer couldn’t get everything he wanted. McConnell made concessions to Democrats, avoiding a repeat of 2013 when the shut-down hurt Republicans politically. Trump couldn’t get Congress to cut $18 billion in non-defense spending, instead funding the National Institutes of Health $2 billion more. Unable to pull the plug on sanctuary cities, Trump showed flexibility on key issues.
Trump hopes to pick his battles in the fall when the current budget bill expires, postponing the looming battle for the 2018 budget which Trump wants to fund the border wall. Most voters, other than Trump’s hardcore following, don’t want to throw good money down a rat hole building a border wall. Schumer managed to get the Continuing Budget Resolution to include funding for medial research, education and infrastructure, the latter a priority for the president. Getting the CBR in place allows Trump to move ahead somewhere down the line with his tax and regulatory reform proposals. When the Commerce Department announced April 27 that First Quarter Gross Domestic Product came in at 0.7%, it made a strong case for fiscal stimulus, the only way to combat a sluggish economy. When the Federal Reserve Board ended QE3 Oct. 29, 2014, the economy was left on its own.
Trump’s tax and regulatory reform proposals take on new urgency now that the Fed no longer actively seeks monetary stimulus. Federal Reserve Board Chairwoman Janet Yellen made it clear that she would let the economy dictate where she goes with interest rates in 2017. All indications point to Yellen ratcheting up the federal funds rate in 2017, despite sluggish GDP numbers. Lawmakers know that a government shut-down could plunge the economy into recession, something lurking. When Trump campaigned in 2016, he said the economy was a mess, now proving true in 2017. Many of Trump’s friends, including billionaire entrepreneurs Sam Zell and Carl Icahn, forecasted recession in 2017. Whether that happens or not is anyone’s guess. Shutting down the government would make a bad situation worse. Trump’s economic proposals take on new priority with GDP faltering.
Getting a CBR to keep the government running proves, if nothing else, Democrats and Republicans can reach compromise when under the gun. Democrats want no changes to the government’s social safety net, especially programs like Medicare and Social Security. Republicans want more cash allocated to defense spending but know there are limitations with current budge constraints. Instead of shutting down the government to fund his border wall, Trump showed he can compromise, even where it hurts. Democrats see no justification for allocating some $12 billion to fund a border wall, when most voters don’t want cuts in vital services. If the economy continues to run down hill in 2017, Trump won’t get the discretionary funds needed to start border wall construction. Building a border wall takes a backseat to many other social programs and defense projects.
Getting the budget deal to keep the government funded at least until next Friday, Trump’s bought himself more time to keep the government running. Whatever the problems with Obamacare, sanctuary cities or a border wall, they’re not enough to shut-down the government. There’s too much at stake for both parties to dig in their heels when next year’s Midterm election loom large, especially for Democrats. When you consider the Fed no longer looks to lower interest rates, tax cuts and regulatory reforms are the only way to inject fiscal stimulus into the economy. If GDP doesn’t improve in Q2, it’s going to be difficult for more rate hikes. Compromising on the budget works for both parties, looking to avoid a destructive government shut-down. Trump now has more urgency to his tax cuts and regulatory reform, something once thought impossible in today’s toxic political climate.
