November is a time of change (to your budgets)

Josh Huder | November 1, 2018

November is a beautiful month of transition. The air is cooler. The leaves are turning.  And because it’s an even-numbered year, the change is particularly jarring on Capitol Hill. Appropriators are wrapping up their business while Americans are electing a new Congress.

The confluence of elections and appropriations in November is fitting because the election results could have a dramatic impact on the next round of budget negotiations. The 116th Congress will convene under the cloud of the Budget Control Act (BCA), often referred to as sequestration, which capped defense and nondefense discretionary spending. Since its enactment in 2011, Congress has had to renegotiate these caps every two years to provide relief for agencies. This year’s deal produced increases of $67 billion for nondefense and $85 billion for defense, which was a big reason FY2019 was the most successful appropriations cycle in two decades. But as the BCA caps snap back into place for the next two fiscal years, Congress will again need to renegotiate the caps in order to protect agency budgets from austere cuts – and the midterms may have a counterintuitive effect on this negotiation.

The 115th Congress raised the caps by a whopping $295 billion over the last two fiscal years, an astounding number compared to a total increase of $139 billion between FY2014 and FY2017. Put differently, the last two years of discretionary spending cap increases more than doubled the increases for the previous four years.

Why such large increases? For one, the 115th Congress was the first to negotiate a post-BCA budget deal under unified Republican government.  Between 2013 and 2017, Democrats were in the White House and, until 2015, also held the Senate majority. This meant both parties felt some responsibility for keeping the government open (and feared the blame if they failed). In the 115th Congress, in contrast, Democrats reasonably concluded the blame for any government shutdown would fall on Republicans, who controlled the House, Senate, and White House.

Exacerbating this political dynamic was Republicans’ inability to pass budget and appropriations bills. BCA cap revisions require changes to law, not a simple majority vote in the Senate. With only 52 (now 51) votes in the Senate, Democrats had significant leverage over the new agreement. Further, House Republicans – facing internal divisions – have been unable to get 218 votes on budget or large appropriations packages without Democratic help. In other words, the minority party was able to play a pivotal role in crafting and passing the budget deal while remaining largely free from political fallout. In the process, Democrats won large increases in non-defense discretionary spending, forcing overall budget numbers upward as Republicans added defense dollars to keep enough of their members on board.

Their consistent reliance on Democratic votes to get them across the finish line on critical measures has been a basic governing failure of the Republican majority. Despite controlling the levers of government, they have often lacked the votes to carry out their most basic responsibilities. This is what allowed Democrats and defense hawks (i.e. Republicans willing to vote for spending bills) to exercise so much leverage on the BCA cap-increase negotiations. In fact, Democrats had far more power to help lift the caps from the minority than they would from the majority.

The question for next week’s midterms is this: will those same political circumstances be at work in the next Congress? Should Republicans hold onto both chambers, we would expect to see the same dynamic play out. Democrats would leverage their votes to press for higher spending numbers without worrying much about the political consequences of failure.

However, if Democrats regain control of one chamber or both in the 116th Congress, budget politics will shift dramatically with the return of divided government and shared responsibility. The costs of budget failure would be borne more equally by both parties, and the result, in all likelihood, would be more modest budget numbers, akin to the 2013 and 2015 deals.

History isn’t a good guide for next year’s budget debate because a Republican president and a Democratic or split-control Congress have never negotiated discretionary spending caps under the Budget Control Act, which remains in effect until the end of the 116th Congress. What seems likely, however, is that Democratic success in the midterms could suppress discretionary budget numbers for the next two fiscal years, ironic for a party typically associated with more robust government spending. But again, November is a time of change. And while Democrats may regain control of committee gavels, they may lose their political edge over budget negotiations.

Categories: 115th Congress, Budget and Appropriations, Congressional Update, Elections, Federal Budget and Appropriations, Media Center, Revise & Extend, Updates