US Debt
© Reuters/Shannon Stapleton
Republicans and Democrats have struck a deal on raising the debt ceiling and US government budgets through 2021, lowering the risk of a shutdown or a default and kicking the $22 trillion economic can down the road.

President Donald Trump announced the deal in a tweet on Monday, calling it a "real compromise" that contained "no poison pills" and delivered "another big victory" for the US military and veterans.

The deal would raise the current budget cap by $320 billion over two years - $30 billion less than the Democrats demanded, while delivering only half of the $150 billion in savings the Trump administration sought, according to Bloomberg. It also cancels the automatic cuts that would have decreased military spending by $71 billion and domestic expenditures by another $55 billion.

This would translate into a $1 trillion budget deficit by 2020, on top of a national debt of $22 trillion already. Though Trump has campaigned as a fiscal hawk, he seems to have dropped that position since, arguing that he should not be judged more harshly than his predecessor Barack Obama, who added nearly $10 trillion to the debt between 2009 and 2017.

House Speaker Nancy Pelosi (D-California) and Senate Minority Leader Chuck Schumer (D-New York) released a statement focusing on what they said Democrats achieved with the deal: ending the sequester (passed in 2013 under the Obama administration) spending cuts, getting $10 billion more for non-military spending over the next two years, and preventing a default.

Quite a few Democrats were baffled by the development, however, arguing that it gave up any leverage against Trump in Congress while setting up a potential budget battle for a hypothetical Democrat president, should one of their candidates manage to defeat Trump in 2020.

The Democrat-dominated House of Representatives has to approve the deal before it adjourns for summer recess on July 26, and the Senate can then approve it the following week. Without this agreement, the US Treasury Department estimated it was risking default before Congress returned from summer recess on September 9.