Budget Talks Stall as Democrats Seek More Government Spending

(Bloomberg) -- Republican leaders balked at Democratic requests for spending on non-defense government programs, warning that the two parties are still far apart on a deal to avert a government shutdown and lift the debt ceiling.

The request came at a meeting Wednesday that included Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, House Speaker Nancy Pelosi, House Minority Leader Kevin McCarthy, Treasury Secretary Steven Mnuchin, acting White House Chief of Staff Mick Mulvaney and acting White House budget chief Russ Vought.

Republicans are demanding more money for defense, and Democrats want to match that with other government spending. Such a deal would raise budget caps, which under current law would trigger a $126 billion automatic budget cut at the end of 2019.

“We are further apart because the Democrats are asking for more money than they asked for last time,” McCarthy said after the meeting. “They just want to spend more.”

The top Democrat on the Senate Appropriations Committee, Patrick Leahy, confirmed that Democrats made an offer but wouldn’t say how much they proposed for non-defense discretionary spending. Mulvaney said Democrats are asking to spend $647 billion on government programs in fiscal year 2020, compared to the $639 billion they previously requested.

“You tell me if things are moving in the right direction,” Mulvaney said after detailing Democrats’ offer, implying that the meeting didn’t go well.

Schumer said Republicans were mischaracterizing the offer from Democrats. He and Pelosi said in a joint statement that lawmakers working together “can get the job done.”

“While we did not reach an agreement, today’s conversation advanced our bipartisan discussions,” they said. “If the House and Senate could work their will without interference from the president, we could come to a good agreement much more quickly.”

Stopgap Measure

Mnuchin said the White House offered a one-year extension of current levels of government spending and a one-year suspension of the debt limit. He said everyone agreed they will raise the debt ceiling but there is still disagreement about the budget caps.

Many Republican members don't want a one-year extension because that would mean lower defense spending than Democrats are offering, and spending instructions for all agencies would be out of date.

Democrats adjusted their request because of internal calculations about resources needed for programs that were already authorized, according to a person familiar with the meeting. A Democratic aide attributed the discrepancy to funds for the census and tax enforcement.

Senate Appropriations Chairman Richard Shelby, an Alabama Republican, offered a more optimistic evaluation of the meeting, which he and Leahy also attended. While Shelby cautioned that the two sides are “not there yet,” he said the “numbers are a lot closer than they have ever been.”

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. Without new spending bills or a stopgap measure, the government would shut down Oct. 1. President Donald Trump has presided over three shutdowns already during his time in office, one of which was caused by Democrats over immigration.

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.

Debt Ceiling Deal

The Democrat-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 Democratic priorities -- without bipartisan approval.

The first package of four House spending bills, which includes defense and totals $1 trillion, passed the House Wednesday. 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.

Both sides are aiming for 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.

Pelosi said last week she agreed that the debt limit must be addressed, but only along with or after an agreement on the top-line levels of government spending. Before Wednesday’s meeting, she said: “We will raise the debt ceiling,” adding, “that is never in doubt.”

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