Debt Ceiling, Budget Jitters Prompt McConnell to Broker Deal
Mick Mulvaney had expressed optimism that they could strike a deal on the spending levels and the debt ceiling.
(Bloomberg) -- Top Senate Republicans are urging the White House toward a government spending and debt limit deal that House Democrats can accept, as lawmakers -- and investors -- cast an increasingly nervous eye toward looming fiscal deadlines.
Majority Leader Mitch McConnell convened a high-stakes meeting Wednesday with Treasury Secretary Steven Mnuchin, Acting White House Chief of Staff Mick Mulvaney, Senate Appropriations Chairman Richard Shelby and other Republicans to forge a deal that would avert another government shutdown and relieve market uncertainty about a debt ceiling standoff. This unified plan would be their opening offer in talks with congressional Democrats.
“We are making progress on where the Senate wants to go and the White House wants to go,” Shelby said as he left the meeting. He said Mnuchin offered ideas that Republicans will take to Democratic leaders.
Mnuchin said the White House ``preference'' is to include the debt ceiling in the deal Congress must strike to fund the government.
Lawmakers this week were optimistic about a budget deal despite the policy challenges. But any agreement could still be scuttled by President Donald Trump, even though he has the most to lose from the economic fallout of a debt default or shutdown heading into the 2020 election.
With just over three months left until the Sept. 30 end of the current fiscal year, the annual budget process has once again gotten off to a slow start.
The Senate has yet to begin debating its 12 annual spending bills for next year as the Appropriations Committee waits for congressional leaders to agree on the overall spending limit.
“We’re hopeful that we are making progress toward getting a caps agreement so we can get started with the Appropriations process,” McConnell told reporters after the meeting, in reference to the budget-caps deal that would set spending levels.
The Democratic-led House, on the other hand, is voting on some of its spending bills this week, although the policies and level of government outlays represent progressive Democratic priorities -- without bipartisan approval.
The first package of four House spending bills, which includes Defense and totals $1 trillion, will get a vote this week. The White House has threatened to veto what it described as an “attack” on Trump’s agenda for, among other things, blocking the transfer of funds for his border wall.
‘Draconian’ Spending Cuts
McConnell is eager to broker a two-year budget deal between the White House and congressional Democrats that would also increase the $22 trillion U.S. borrowing limit, which came back into effect in March. Without an increase, Treasury would begin defaulting on U.S. payment obligations this fall, according to independent estimates.
Democrats have insisted that any increase be coupled with an agreement to raise caps on domestic discretionary spending. If the caps aren’t lifted, current law would mandate slashing $126 billion in fiscal year 2020, an automatic cut known in Washington parlance as a sequester.
Republican senators are advocating for a budget caps deal to avoid the sequester’s $71 billion cut to defense spending.
“Two weeks ago I was with the president and talked with him about how draconian – he knows this – a sequester would be for national security,” Shelby said. “Sequester is staring at us; it’s in our lap.”
Mulvaney Optimism
Ahead of the Wednesday meeting, Mulvaney expressed optimism that they could strike a deal on the spending levels and the debt ceiling.
“We are going to fund the government, the only question is at what level,” he said Tuesday at a Wall Street Journal event, adding he doesn’t see the automatic cuts happening. “I do not see it as being a very dramatic event this year.”
The current budget cap is $716 billion for defense funds and $597 billion for non-defense domestic spending. Democrats have proposed a $17 billion in crease for defense to $733 billion and a $34 billion increase for non-defense to $631 billion.
Trump’s budget proposed increasing defense spending by $34 billion to $750 billion, using a budget gimmick, while allowing non-defense outlays to be cut by $30 billion to $567 billion.
Republican House spending panel member Tom Cole of Oklahoma said the final negotiation will have to be something between the White House proposal and the House appropriations bills.
“It depends on whether or not we really want a deal,” Cole said. “It can’t be the Trump budget, it’s not going to be the bills we have got here.”
Cole said the Senate should provide leadership by steering both sides to a compromise.
Once leaders finalize a top-line budget deal, then lawmakers can tackle dozens of smaller policy disputes in each spending bill, any one of which could trigger a government shutdown.
‘Reckless’ Shutdown
In December the government partially shut down for 35 days over Trump’s demand for border wall funding.
“There was a reckless 35-day government shutdown that ended with Donald Trump engaging in an unconditional surrender,” House Democratic Caucus Chairman Hakeem Jeffries said Tuesday. “We would expect he would not go down that reckless course again.”
Republicans say Democrats should not provoke a conflict by including language in their spending bills aimed at ending all border wall construction.
“Democrats have an opportunity to show whether they can govern or not,” said Georgia Republican Tom Graves. “Given what I have seen in committee and what they are proposing on the floor, they have got some challenges ahead. They salted these bills with a lot of progressive poison pills.”
Long-serving members of the House Appropriations Committee like Democrat Rosa DeLauro of Connecticut predicted lawmakers could reach a compromise on the policy disputes.
“We’ve come to agreements on these bills in years past,” she said. “So I’m optimistic.”
--With assistance from Nancy Ognanovich.
To contact the reporters on this story: Erik Wasson in Washington at ewasson@bloomberg.net;Nancy Ognanovich in Washington at nognanovich2@bloomberg.net
To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Anna Edgerton
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