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The budget deal will add billions to the deficit. What are the benefits and risks?

After a brief government shutdown early Friday, Congress approved and President Trump signed a budget deal that's expected to add around $300 billion to the deficit over a decade. Should Americans be concerned? Judy Woodruff gets reactions from Jared Bernstein of the Center on Budget and Policy Priorities and Maya MacGuineas of the Committee for a Responsible Federal Budget.

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  • Judy Woodruff:

    Last night's brief government shutdown may not have had much of an impact, but the wide-ranging budget deal signed today by the president is expected to add around $300 billion to the deficit over a decade.

    With the additional money for the military, for domestic programs and disaster relief, the Congressional Budget Office forecasts next year's deficit, not the total national debt, to climb to $1.2 trillion. This, of course, comes after the tax cuts signed into law in December.

    With me now, Maya MacGuineas of the Committee for a Responsible Federal Budget, and Jared Bernstein, a former economic adviser to Vice President Biden. He's now at the Center for Budget and Policy Priorities.

    And we welcome both of you back to the NewsHour.

    So, Maya, people are running all over town today pulling their hair out — at least a lot of people are — saying, this is a lot of money. Should they be concerned?

  • Maya MacGuineas:

    Oh, absolutely.

    This is a fiscal free-for-all, where what is happening is, no longer are there any constraints in the budget process, where lawmakers are basically saying, we want this, we want this, we want this, and we will trade it to you for whatever you want, as long as nobody pays for anything.

    And we are doing bad fiscal policy, where we are increasing our national debt that is already at near historical levels, and it's going to be bad economic policy in the long run. And I think it reflects a broken political process as well. So there's a lot that this reflects poorly on.

  • Judy Woodruff:

    Jared Bernstein, you don't — you think deficits do matter.

  • Jared Bernstein:

    I do.

  • Judy Woodruff:

    But you also believe there's some reasons for some of this spending in this bill.

  • Jared Bernstein:

    Absolutely.

    I agree with a lot of what Maya just said. I want to make a distinction between the long run and the short run. In the short-term, there is a lot that's good in this bill that is actually very good for constituents who have really been shortchanged by fiscal policy for a long time, expanding the Children's Health Insurance Program, community health centers, disaster relief, infrastructure, VA hospitals, college affordability.

    That's all in there. Also, in the near term, I think some of this fiscal stimulus could actually help people who are still left behind in this economy. It's very unusual to do this when the unemployment rate is already low, but there is a chance that it could go lower and actually help some folks.

    Now, in the long term, though, I'm pretty much where Maya is. There is a disjunction between what we collect and what we spend, and eventually that is going to be definitely problematic.

  • Judy Woodruff:

    So, Maya, some of this spending, in other words, there is a rationale behind this. There are people in need. I mean, some of the programs Jared mentioned have a serious constituency behind them.

  • Maya MacGuineas:

    Absolutely.

    There's no judgment on whether these spending priorities are good. Many and probably most of them are. In budgeting and in governing, when something is worth doing, it's also worth paying for.

    And what's happened — and I think this really started with the huge unpaid-for tax cuts — is we have thrown off the fiscal constraints. And now the argument is, we don't have the pay for anything. And when it came to tax cuts, there was an argument that wasn't true that the tax cuts would pay for themselves, and they won't.

    This time, no one even made the argument. It's just that paying for things is hard. And I think there seems to be political agreement between both parties that nobody talks about budgetary trade-offs or how to pay for things anymore.

    And Jared said this might be good for the economy, but it might be bad for the economy. There is some real risk in the short-term this will not pay off well. I would argue it's almost certainly not going to. And certainly in the long-term, it's going to have negative effects.

  • Judy Woodruff:

    Jared, what about holding people accountable for what they have said in the past? There are number of, we know, not just Republicans, but some fiscally conscious Democrats who have been saying for years, this country has got to slow down the spending.

  • Jared Bernstein:

    Well, first of all, a lot of those supposedly fiscally responsible people, they say that, and then they vote for policies that increase the deficit and the debt repeatedly. Bob Corker is the most recent example.

    And so I do think that the political incentives are all wrong here. There's really no consequence to voting for increasing deficits and debt, and, in fact, it probably goes the other way. If people did vote more responsibly to raise the revenues they need, to raise taxes, because eventually that's what we're going to have to do if we're going to square these difference, they would probably be politically punished.

    One quick point. What Maya is suggesting is that this extra spending is going to make the economy overheat this year. That's definitely a possibility, but if you look at the indicators of overheating, like inflation, they're actually very tame right now.

    And I suspect that this stimulus will be helpful if that regard.

  • Judy Woodruff:

    What about that, Maya?

    And I also do want to ask you about those Republicans who have been saying for years there has to be cutback, that the spending increases can't continue. And, again, this is on top of, what, $1.5 trillion almost in tax cuts that were enacted by the Congress, that the president signed just two months ago.

  • Maya MacGuineas:

    Absolutely.

    The loss of any real fiscal responsibility is very negative in a lot of ways. So, we have added to the debt at the time when the debt is the highest relative to the economy that it's been since we came out of World War II. We're about to have trillion-dollar deficits.

    Last time that happened, we were in a huge recession, and it was understandable. This is self-imposed, and it's very damaging during a time when the economy is expanding, and we won't be as ready for the next downturn.

    And it's made a lot of hypocrisies come to the surface, I'm afraid. And that means it's harder for when people are talking about things that are necessary. We do have to deal with more revenues, and we do have to deal with fixing our entitlement programs. But everybody has lost the credibility to make that case, which means we will continue to kick the can on this.

  • Jared Bernstein:

    So, here's where I would come in on that.

    The world that Maya is describing is the world that we really should be in, where people are much more fiscally responsible, both voters and the people they vote for. That's not the real world. That's not the world we live in.

    So we can decide to wait until we arrive at that world and disinvest in children's health care and infrastructure and helping folks who still have been left behind in this economy. That's an unacceptable trade-off to me.

    I think we have to walk and chew gum at the same time. I think we have to make the investments that are so critical to this country, especially in an era of inequality, and, at the same time, really work hard to put revenues back on the table, because that's the key to solving this problem.

    (CROSSTALK)

  • Maya MacGuineas:

    And controlling the spending side.

    I think the key in fixing this problem is on both sides. And I think walking and chewing gum at the same time doesn't mean putting everything on the national credit card. What we need is a set of rules and constraints that both parties can actually agree to.

    And we go back to what budgeting is. If something is worth doing, you have to figure out how to pay for it, and there are actual trade-offs. The Republicans and Democrats will continue to fight about the size of government, but if we just come up with a bipartisan agreement that we're just not going to pay for anything, that bodes very, very poorly for the long-term sustainable situation in the economy.

  • Judy Woodruff:

    But, in any event, we're not there yet. We are where we are. We are not at place where people are looking…

  • Maya MacGuineas:

    We're not in that world.

  • Judy Woodruff:

    … at the bottom line.

    Jared Bernstein, Maya MacGuineas, thank you both. Appreciate it.

  • Maya MacGuineas:

    Thank you.

  • Jared Bernstein:

    Thank you.

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