As noted here two weeks ago, Kabuki Theater is "that wonderful form of Japanese classical theater known for its elaborate costumes and dynamic acting." It is also used in political conversation to describe an event characterized more by showmanship than by substance. That event has now taken place in Washington, leaving nearly every vested interest with something to celebrate. The budget deal also extends the budget ceiling forward for two years. True to form, it also proved the old adage: but for the last ten minutes, nothing would ever get done.

The motivation to hammer out the last-minute budget deal was provided by a letter from Treasury Secretary Steven Mnuchin to House Speaker Nancy Pelosi on July 12. In it, he said that the "extraordinary measures" he had been taking since the debt limit was reached in early March were about to be "exhausted." This move allowed him to conduct budget negotiations directly with Pelosi, sidelining Trump's more fiscally responsible budget director Mick Mulvaney, resulting in a deal that has a win for nearly every vested interest in Washington.

First and foremost, it solves the number one problem politicians face when they leave Washington for their six week "recess": unhappy constituents quizzing them on big spending Washington. It gives President Trump a victory: more spending for the military and "his" vets. It gives Pelosi and her Democrat counterpart in the Senate, Chuck Schumer, a win by increasing domestic spending by even more than that granted the military. It scores a win for Mnuchin, who is now free to borrow without limit the sums increasingly needed to pay Congress's bills. It provides a chance for establishment politicians to claim improved "stability" without the threat of another government shutdown while touting the kind of pragmatism and compromise that Washington is famous for but largely missing until now.

It also funds Planned Parenthood, provides nothing for Trump's wall, fails to loosen budgetary constraints on the border patrol, and, best of all for big spending politicians, it finally and completely obliterates any part of the highly-touted but rarely followed Budget Control Act of 2011 (BCA) and its "sequester" caps. As House Appropriations Chairwoman Nita Lowey (D-NY) celebrated: "I am proud that this agreement ends the senseless austerity imposed by the Budget Control Act."

The deal includes extending the budget ceiling until June 2021, a convenient eight months after the November 2020 elections.

It increases government spending by nearly a third of a trillion dollars over the next two years, part going to the military and part to domestic spending. As Pelosi and Schumer chortled, the deal "will enhance our national security and invest in middle class priorities that advance the health, financial security, and well-being of the American people."

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It predictably engages in phony bookkeeping maneuvers to show an attempt at cutting spending. The White House sought $150 billion in those faux "cuts." The deal gives it $77 billion by – ready? – extending cuts to Medicare beyond fiscal year 2027(!), and by "extending" fees being collected by Customs and Border Protection. That $77 billion in cuts is less than two percent of the government's total budget and just one quarter of the increased spending provided in the agreement.

This is the same stunt engaged in by Presidents Reagan and the elder Bush. Said Americans for Tax Reform:

In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes. The tax hikes went through, but the spending cuts did not materialize. President Reagan later said that signing onto this deal was the biggest mistake of his presidency.

In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes. The tax hikes went through, and we are still paying them today. Not a single penny of the promised spending cuts actually happened.

At present, the federal government borrows a quarter of every dollar that it spends, with that percentage increasing in the next few years thanks to this deal and as boomers retire and interest rates increase.

The "deal" – humorously being called a "compromise" – is expected to be voted on, and passed by, Congress on Thursday, a day before the summer recess begins. When it is signed into law by the President, it may, as Maya MacGuineas, president of the Committee for a Responsible Federal Budget said, "end up being the worst budget agreement in our nation's history, proposed at a time when our fiscal conditions are already precarious."

With the obliteration of the BCA and the obvious lack of any fiscal backbone evident among the players, there appears to be nothing stopping big government from getting bigger. The only possible restraint could come from the bond market, which until now has been very happy to accommodate the spending and absorb the increasing amounts of debt securities from a country that increasingly fails to show any sort of fiscal restraint in its spending.

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Sources:

McAlvanyIntelligenceAdvisor.com: The Coming Angst About Raising the Debt Ceiling Will Be Pure Kabuki Theater

News.Yahoo.com: Trump, Democrats reach two-year budget deal that raises debt ceiling

MarketWatch.com: Bipartisan deal reached on budget and debt ceiling, ensuring no federal shutdown or default

TheResurgent.com: This is a Bad Deal

DailySignal.com: Art of the Budget Deal: Trump, Pelosi Agree to Up Spending and Debt

The Wall Street Journal: White House and Congress Reach Deal on Spending, Debt Ceiling

Background on the Budget Control Act of 2011

Background on Mick Mulvaney

Breitbart.com: Fiscal Cliff Deal: $1 in Spending Cuts for Every $41 in Tax Increases