New Budget Deal Puts Final Nail in the Tea-Party Coffin

President Trump and congressional leaders are nearing a deal that would raise the discretionary-spending caps by $320 billion over two years and offset less than one-quarter of those costs (and even those offsets would take a decade to materialize). The budget deal would essentially repeal the final two years of the 2011 Budget Control Act and raise the baseline for future discretionary spending by nearly $2 trillion over the decade.

This represents a fitting conclusion of the Budget Control Act — the crown jewel of the 2011 “tea-party Congress.” The decade-long shredding of these hard-fought budget constraints mirrors the shredding of Republican credibility on fiscal responsibility.

The story begins a decade ago, when a budget deficit that had declined to a modest $161 billion by 2007 was hit with the Great Recession. While recessions always automatically raise budget deficits (fewer tax revenues, more unemployment and welfare costs), President Bush, President Obama, and both parties in Congress deepened the red ink with the TARP bailouts, which were initially expected to cost $700 billion, as well as with President Obama’s nearly $1 trillion stimulus law, which failed to rescue the economy even by the White House’s own metrics. By 2009, the deficit had exceeded $1 trillion for the first time, reaching $1.4 trillion.

Horrified by Washington spenders, CNBC’s Rick Santelli stood on the floor of the Chicago Mercantile Exchange on February 19, 2009, and called for a “tea party” to end the bailouts, stimulus payments, and red ink. Grassroots tea-party groups formed — further enraged by the later enactment of an expensive new Obamacare entitlement — and helped Republicans capture the House in 2010 with a stunning 63-seat pickup and also pick up seven Senate seats.

The new “tea party” House majority declared an end to deficit politics as usual. The new majority quickly banned pork-barrel earmarks and trimmed the 2011 appropriations bills that had been carried over from the previous year. The House then rallied around a budget produced by House Budget Committee chairman Paul Ryan (R., Wis.) that would gradually eliminate the deficit by converting Medicare to a premium-support model, repealing Obamacare, and cutting other spending. While Senate Democrats blocked these reforms, the need to raise the debt limit over the summer gave House Republicans unique leverage to force policy concessions from President Obama and Senate Democrats. The deficit-obsessed Republicans expressed a willingness to risk defaulting on national-debt interest payments in order to force spending cuts. And after months of intense negotiations, the two parties agreed to the Budget Control Act, which would cap discretionary spending through 2021 at much lower levels than the baseline, saving $2.1 trillion over that period.

Unfortunately, this victory — which seemed like it would be the first of many — proved to be the apex of the tea-party movement. Without the leverage of the debt limit, President Obama and Senate Democrats could easily block House Republican spending reforms. The 2012 reelection of President Obama then cost the tea-party GOP some of the momentum that it acquired two years earlier.