Deficit-swelling

Deficit-swelling Trump White House plans to use deficit against Democrats

After mostly brushing off deficit concerns for two years, the White House now plans to reposition itself as an unlikely enforcer of fiscal responsibility.

By ANDREW RESTUCCIA and NANCY COOK

The self-described “king of debt” is about to get religion.

In the next several months, the Trump administration faces several big spending and budget showdowns with Congress. And after mostly brushing off deficit concerns while pushing through a costly tax-cut plan, the White House now plans to reposition itself as an unlikely enforcer of fiscal responsibility led by its new top budget official, a veteran of the conservative group Heritage Action.

The series of budget fights will come into focus on Saturday, when the U.S. government hits its debt limit, already at a record of roughly $22 trillion. That won’t cause an immediate crisis, thanks to Treasury’s ability to keep paying the bills for a limited amount of time using a power known as “extraordinary measures.”

Still, Saturday marks the beginning of a series of budget challenges for the Trump White House. The next marker comes on March 11, when the White House is scheduled to release the president’s broad budget priorities, which will feature a call for deep spending cuts — and be dead on arrival in the Democratic-led House. Administration officials have been meeting for weeks to devise a strategy to dramatically boost defense spending, fulfilling a promise to Trump’s base, while at the same time placing a strong new rhetorical emphasis on deficit concerns in a bid to undermine Democratic demands for more spending on nondefense programs like foreign aid, education and environmental protection.

It’s a long-shot plan certain to face accusations of hypocrisy — especially since it’s coming from Trump, who once boasted, “I’ve made a fortune by using debt.” Privately, many White House officials also dismiss the notion that the federal debt is a major problem.

The approach will also touch off another fierce, months-long fight with newly empowered Democrats in Congress, who have railed for two years now that the Trump administration is recklessly exploding the deficit.

But administration officials insist they’ve got the upper hand this time around. They think they’ve found a way to fund their defense spending increase — and they contend Democrats have more to lose from the automatic spending cuts triggered by sequestration.

Russ Vought, acting head of the White House’s Office of Management and Budget, sent the opening salvo in a recent op-ed lamenting Washington’s spending problem and warning of sky-high annual deficits and the national debt. Some D.C. budget wonks scoffed, previewing the reaction that is sure to become more pronounced as the battle heats up and politicians begin examining Trump’s blueprint.

The president’s critics countered that the Trump administration backed a tax-cut plan that will cost an estimated $2.3 trillion over 10 years and add $1.9 trillion to the debt. And after much consternation, Trump agreed to sign a massive $1.3 trillion spending bill last year — though afterwards, he told aides he’d regretted it apart from the boost it gave to the military.

“It rightly identifies the problem and then is totally wrong on the solutions,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, of Vought’s op-ed.

And if the Trump administration were really serious about tackling spending, these critics said, it would take on politically treacherous issues like entitlements. One senior administration official said the president’s upcoming budget proposal would not offer any new cuts to mandatory spending and would track with what they’ve proposed in past budgets.

“The core structural problems remains and have not been addressed,” said Michael Peterson, CEO of the Peter G. Peterson Foundation. Those problems include the growing share of the federal budget taken up by spending on Medicare and Social Security, two programs for the elderly, disabled and children that politicians have been loath to touch. Peterson warned that the United States is on a “very unsustainable, dangerous and damaging fiscal path.”

Trump’s plan to raise defense spending without allowing the traditionally reciprocal increase in nondefense discretionary spending requires some tricky math. Among the tools the administration plans to use to cut spending: raiding the Overseas Contingency Operations fund, which has not been subject to the sequestration budget caps Congress put in place earlier this decade.

Such a move has long come under fire from fiscal conservatives, including Mick Mulvaney, the director of the Office of Management and Budget as well as the acting White House chief of staff, who once sponsored legislation to prevent the OCO from being used in that way and has called the move a “gimmick.” Democrats also oppose the tactic.

But administration officials said Mulvaney is now embracing use of the OCO, though they privately acknowledge the tricky politics of his abrupt shift. Even some in the administration are hesitant about the approach, reluctantly going along with it because it’s seen as the only option. “I don’t like it, personally,” one senior administration official told POLITICO.

The release of the president’s budget will kick off a series of deadlines for the administration, which should last through the fall of 2019.

Even though the U.S. will officially reach its debt limit on Saturday, the Congressional Budget Office estimates the country won’t run out of money to pay its bills until late summer or early fall, during which Congress will be negotiating a deal to raise the debt ceiling.

Congress must also strike an agreement by Oct. 1 to raise the sequestration budget caps.

In the wake of the bruising government shutdown, budget experts say appropriators and Republican congressional leadership have little appetite for any type of budget showdown this fall — just as the funding bills for the government also must get passed. Republicans saw their approval ratings tank during the 35-day partial federal shutdown over border wall funding, with the majority of Americans in poll after poll saying they blamed both Trump and congressional Republicans.

“Similar to last year, I think they will work out the agreement on the debt limit and an agreement to adjust the caps for 2020 and 2021. There will be pressure to try to make sure they don’t have to deal with it in an election year,” said William G. Hoagland, former Republican staff director of Senate Budget Committee.

Still, that sentiment hasn’t stopped the Trump administration and the new acting director of the budget office from attempting to make demands — even in this new era of divided government. Vought’s op-ed called on Congress to adhere to the 5 percent spending cuts for major swaths of the federal government and then boost military spending by taking cash from the overseas fund.

One senior administration official defended the idea, saying that raiding the OCO fund has never been used as an opportunity to cut spending and therefore is a new, valid idea.

“That is what different this time around,” the official said. “We are saying: We are in divided government.”

Just as the administration now views OCO as a legitimate vehicle for cutting spending, some administration officials are also now expressing deep concern about the deficit — hence, the expected proposal of deep spending cuts in the upcoming budget.

Aides said the Treasury Department will take point on debt limit talks, while the Office of Management and Budget is driving the budget proposal.

Treasury Secretary Steven Mnuchin has said he would like Congress to raise the debt ceiling without any political showdowns or attempts to extract additional policy concessions — a move that could anger some House Republicans.

One of the senior administration officials dismissed concerns that the debt limit fight will become a political nightmare, calling the issue, “much sound and fury signifying nothing.”

But the debt limit and budget cap negotiations will force the White House to help congressional leadership deliver votes on a key issue, all while keeping the president — the king of debt — on message.