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Budget Deal: Mackenzie Eaglen Told You So

Posted by Mackenzie Eaglen on

Mackenzie Eaglen, defense analyst at the American Enterprise Institute.

Mackenzie Eaglen, defense analyst at the American Enterprise Institute.

The newly negotiated budget deal for the next two years is very good news, particularly for the US military and Pentagon planners. The defense budget will be funded close to the President’s request this year, there is no threat of a havoc-wreaking long-term continuing resolution, and there is predictability in funding levels for next year.

Vital to getting to this outcome was the effort spearheaded by Rep. Mike Turner, who garnered the support of over 100 colleagues to eliminate the possibility of a continuing resolution. By threatening to withhold their votes, they took that option off the table. The only one left was a budget deal.

Overall, the deal is better for defense than Ryan-Murray two years ago and allows the topline to begin growing again after being flat for the past three years.

This being Washington where little is ever really new, it is helpful to revisit predictions versus reality. For instance, a poll on defense spending outcomes run by the Center for Strategic and International Studies this summer saw over half of respondents choose “full-year continuing resolution” as the most likely outcome. In hindsight, it was pretty obvious there would be a deal, that it would pass with Democratic support, and that it would not fully be paid for “on the books.”

Let me revisit my predictions from September and see how they match up against today’s reality:

Prediction: “There will most likely be a deal to lift the Budget Control Act caps, but the final spending bill will not be in the model of Ryan-Murray, nor will it led by Budget Committee leadership.”

Budget deal: There is a budget deal. It was not negotiated by Budget Committee leadership. It is and it isn’t in the model of Ryan-Murray. It is in that it identifies offsets, but it is not in that it provides much more relief than the fiscal BandAid-equivalent of Ryan-Murray.

Prediction: “A year-long CR is unlikely for three reasons.”

Budget deal: A deal by definition means there will be no continuing resolution this year or next.

Prediction: “This new omnibus appropriations deal will actually lift defense and non-defense discretionary caps higher than they would have risen otherwise—essentially meeting the President’s requested levels and the Republican-passed budget for defense.”

Budget deal: This bipartisan deal funds defense budget at just $5 billion below the President’s requested level for 2016. 2017 is not as rosy an outlook, but it still allows the defense budget to begin to grow again, and, more significantly, to get an increase in the base budget where it is desperately needed. Resetting the baseline for defense at a higher number is better than the one-time shot-in-the-arm approach of using temporary emergency money through the war account.

Prediction: “As in any “Washington math” solution, a chunk of the near-term increase will have to be debt-financed, increasing the deficit for at least the first two years. The assumption—and hope—is that a new president and Congress in 2017 might be able to finally rid both Congress and the country of sequestration entirely.”

Budget deal: There just isn’t enough money to go around absent dramatic changes to entitlement programs, which always meant the budget deal would partially be paid for by increasing the debt.

Prediction: “But new offsets or additional deficit spending are possible anytime that bills have to pass a Republican-controlled Congress with large Democratic support.”

Budget deal: The increases in spending are partly “paid for” through debt-financing.

Prediction: “Any budget deal to raise the caps and fund the government for 2016 must rely on Democratic votes to pass, just as the Medicare “Doc Fix” did earlier this year and as will be the case with a “clean” debt ceiling increase this winter.”

Budget deal: Democrats are lining up quickly to express their support for this budget deal, and it was negotiated by leadership of both parties and the President.

All in all, this is a win for defense and a much-welcomed return to regular order without the threat of shutdowns, defaults, or fiscal cliffs.

And, one last prediction? This Bipartisan Budget Act of 2015 will pass, the vote will not be close, and it will become law.

What do you think?