On August 2, 2019, Trump signed the Bipartisan Budget Act of 2019 into law. The legislation raised federal spending limits for two years, increased military and domestic spending, and suspended the federal debt ceiling until 2021.
The projected financial consequences were enormous.
According to the Committee for a Responsible Federal Budget (CRFB), the agreement would add approximately $1.7 trillion to America's projected national debt over the following decade, including additional interest costs and the long-term consequences of establishing higher spending levels.
It was another major spending agreement negotiated by Republicans and Democrats, and another example of Washington politicians finding common ground when it came to spending money they didn't have.
But perhaps the most interesting aspect of the agreement was that it effectively made the spending increases from Trump's 2018 budget deal permanent in the federal government's long-term budget projections.
America wasn't simply spending more money. It was establishing a new, higher baseline for future government spending.
The Return of the Budget Spending Wars
To understand the 2019 agreement, it helps to look back at the Budget Control Act of 2011.
Following the financial crisis and years of growing federal deficits, Congress had established spending limits intended to restrain government expenditure.
The agreement introduced caps on discretionary spending, covering areas such as defense, education, transportation, and numerous federal agencies.
It also established automatic spending reductions known as sequestration, which were intended to encourage politicians to negotiate meaningful reductions in the federal deficit.
The restrictions were unpopular with lawmakers in both parties.
Republicans wanted more money for the military, while Democrats wanted additional funding for domestic programs.
In 2018, Trump signed a bipartisan agreement that raised spending limits considerably. That agreement was already expected to increase federal debt by approximately $418 billion over ten years, including interest.
Then, in 2019, Congress decided it wanted to go even further.
The Bipartisan Budget Act of 2019 increased discretionary spending limits by approximately $320 billion over fiscal years 2020 and 2021.
Rather than returning to the previous spending restrictions, lawmakers agreed to maintain the higher spending levels and increase them further.
Trump signed the legislation.
Where Was the $1.7 Trillion Coming From?
The $1.7 trillion estimate deserves some explanation because it wasn't simply the amount of money Congress authorized for immediate spending.
The agreement directly increased discretionary spending limits by approximately $320 billion over two years.
There were also approximately $55 billion in spending reductions and other budgetary offsets.
The immediate net increase in authorized spending was therefore considerably smaller than $1.7 trillion.
So where did the larger figure come from?
The answer involves something called the federal budget baseline.
When the Congressional Budget Office prepares long-term budget projections, it makes assumptions about how government spending will evolve under existing legislation.
One important assumption is that discretionary spending will generally continue growing with inflation after existing spending caps expire.
By establishing higher spending limits for 2020 and 2021, Congress effectively raised the starting point for those future projections.
This meant that the financial consequences extended well beyond the two years covered by the agreement.
The Committee for a Responsible Federal Budget calculated the projected impact as follows:
| Component | Estimated impact |
|---|---|
| Direct spending increases | $320 billion |
| Budgetary offsets | -$55 billion |
| Interest on direct costs | $95 billion |
| Higher future spending baseline | $1.2 trillion |
| Additional interest on future spending | $155 billion |
| Total projected debt increase | $1.7 trillion |
The figures are rounded.
In other words, the $1.7 trillion estimate included the immediate spending increases, the long-term consequences of establishing a higher spending baseline, and the additional interest associated with borrowing.
This is an important distinction. Congress wasn't writing a $1.7 trillion cheque in 2019. It was approving a spending arrangement that was expected to increase projected federal borrowing by approximately that amount over the following decade.
More Money for the Military
As with the previous budget agreement, military spending was one of the principal priorities for Republicans.
Trump had repeatedly promised to rebuild America's military, increase defense capabilities, and modernize military equipment.
The 2019 agreement provided additional funding for defense programs, including military personnel, weapons procurement, research, operations, and equipment modernization.
Republicans argued that America needed a stronger military to deal with growing international challenges.
There was also considerable bipartisan support for maintaining military readiness.
However, there was a financial problem.
The United States was already spending enormous amounts of money on defense while running substantial annual budget deficits.
Rather than finding equivalent savings elsewhere, Congress simply authorized more spending.
The military wasn't the only beneficiary, however.
More Money for Domestic Programs
Democrats also secured substantial increases in domestic spending.
The agreement provided additional funding for numerous federal programs, including education, healthcare, housing, transportation, and other domestic priorities.
Both parties had political constituencies they wanted to satisfy, and the budget agreement provided an opportunity to deliver funding to their preferred programs.
The arrangement was essentially a political compromise.
Republicans got more military spending. Democrats got more domestic spending. Both parties avoided the spending reductions that would have been necessary to bring the federal budget closer to balance.
And Trump got to sign another major piece of legislation.
The agreement also suspended the federal debt ceiling until July 31, 2021, allowing the Treasury Department to continue borrowing without being constrained by the previous statutory limit during that period.
This was particularly significant because the debt ceiling had frequently been used as a political bargaining tool in previous budget negotiations.
Rather than using the opportunity to impose meaningful fiscal restrictions, Washington effectively removed the borrowing obstacle for another two years.
The Deficit Was Already Approaching One Trillion Dollars
The timing of the legislation makes the decision particularly interesting.
The American economy was not experiencing a major recession in 2019. There was no pandemic, no nationwide economic shutdown, and no extraordinary emergency requiring enormous government spending.
The economy was expanding, unemployment was relatively low, and the federal government was collecting substantial tax revenue.
Yet the budget deficit continued to grow.
According to the Congressional Budget Office, the federal deficit reached approximately $984 billion in fiscal year 2019.
That meant the government was borrowing almost one trillion dollars in a single year, even before the extraordinary spending associated with COVID-19.
The CBO subsequently revised its long-term projections following passage of the Bipartisan Budget Act.
Its August 2019 analysis estimated that the legislation increased projected primary spending by approximately $1.5 trillion over 2020–2029, with the overall debt impact reaching approximately $1.7 trillion after interest.
The agency also projected that publicly held federal debt would reach approximately 95% of GDP by 2029.
The spending agreement had made an already difficult financial situation considerably worse.
Republicans and Democrats: Two Parties, One Spending Problem
One of the more frustrating aspects of the 2019 budget agreement was that it demonstrated how little difference there was between the two parties when it came to controlling government expenditure.
Republicans traditionally campaigned on fiscal conservatism, limited government, lower taxes, and reducing federal spending.
Democrats generally supported more expansive government programs and greater public investment.
Yet both parties were willing to approve spending increases that would add substantially to America's national debt.
The agreement was negotiated between Republican and Democratic congressional leaders, and it received bipartisan support.
This wasn't simply a case of Trump forcing an unpopular spending bill through Congress. It was a political arrangement that both parties wanted.
Each side got something in return.
Republicans received the defense spending they wanted, while Democrats received increased funding for domestic programs.
The American taxpayer received the bill.
Trump could have opposed the agreement, demanded spending reductions, or insisted that increases in government expenditure be offset by equivalent savings elsewhere.
Instead, he signed it.
It was difficult to reconcile this decision with his campaign promises about eliminating government waste and reducing America's debt.
The Tax Cuts Made the Situation Worse
There was another important factor contributing to the deterioration of America's fiscal outlook: the 2017 Tax Cuts and Jobs Act.
Trump had already approved legislation that substantially reduced federal tax revenues.
The corporate income tax rate had been reduced from 35% to 21%, while numerous changes had been made to individual income taxes.
The original projections suggested that the legislation would increase federal deficits by approximately $1.9 trillion over ten years, including interest and economic feedback.
Now, two years later, Trump was signing another spending agreement that would increase projected federal borrowing by approximately $1.7 trillion.
The combination was financially significant.
The government was collecting less revenue because of the tax cuts while authorizing substantially more spending through successive budget agreements.
This was not a strategy for reducing the national debt.
It was a strategy for borrowing more money.
And the consequences would continue accumulating long after Trump had left office.
The Road to the COVID-19 Spending Explosion
The 2019 budget agreement was one of the last major spending decisions made before the COVID-19 pandemic transformed American economic policy.
By early 2020, the federal government was already facing enormous projected deficits.
Then came the pandemic.
Trump's administration would go on to approve the CARES Act, followed by additional emergency relief legislation in December 2020.
Those packages would add trillions more to the federal government's borrowing requirements.
The pandemic was an extraordinary circumstance, and emergency spending deserves to be evaluated separately from ordinary budget decisions.
However, the financial problems facing the United States didn't begin with COVID-19.
They were already developing during a period of economic expansion, when Washington was approving tax cuts and increasing government spending without adequately addressing the resulting deficits.
The 2018 and 2019 budget agreements were particularly important stepping stones in that process.
Another Broken Promise About Fiscal Responsibility
Donald Trump repeatedly portrayed himself as a businessman who understood money, negotiation, and financial management.
He criticized Washington politicians for wasting taxpayer money and promised to bring a different approach to government.
Yet his record on federal spending told a different story.
The 2017 tax cuts reduced projected federal revenues. The 2018 budget agreement increased spending limits. The 2019 agreement raised them again and established a higher baseline for future government expenditure.
By August 2019, the United States was borrowing almost one trillion dollars annually, and the Congressional Budget Office was projecting increasingly unsustainable levels of federal debt.
The $1.7 trillion projected debt increase associated with the 2019 budget agreement was not an unavoidable consequence of a national emergency.
It was the result of deliberate political decisions made by elected representatives from both parties, and approved by a president who had promised to rein in government spending.
Trump had campaigned as a businessman who would make Washington more financially responsible. But by 2019, his administration had become another participant in the spending bonanza that was pushing America's national debt ever higher.
The question was no longer whether Washington could afford to keep spending this way.
It was how long American taxpayers could continue paying for it.
Sources and Further Reading
Committee for a Responsible Federal Budget — "Proposed Budget Agreement Could Cost $1.7 Trillion" (July 23, 2019).
https://www.crfb.org/blogs/proposed-budget-agreement-could-cost-17-trillionCommittee for a Responsible Federal Budget — "Addressing Common Claims About the Budget Deal" (July 25, 2019).
https://www.crfb.org/blogs/addressing-common-claims-about-budget-dealCongressional Budget Office — "An Update to the Budget and Economic Outlook: 2019 to 2029" (August 2019).
https://www.cbo.gov/publication/55551Committee for a Responsible Federal Budget — "President Trump's $4 Trillion Debt Increase" (July 25, 2019).
https://www.crfb.org/blogs/president-trumps-4-trillion-debt-increase