Congress

Pelosi, Mnuchin appear close to spending caps, debt limit deal

Agreement would likely include a two-year extension of the debt limit and spending levels

Pelosi reiterated Tuesday her view that in addition to "parity" for nondefense and defense spending increases, funding should be added for Department of Veterans Affairs health care. (Photo By Bill Clark/CQ Roll Call)

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are close to making an announcement about spending caps and the debt limit.

“We have a clear understanding of what we want to agree to, and I think that's progress,” Pelosi said Tuesday afternoon after speaking with Mnuchin, who was preparing to leave Wednesday for the G-7 meeting in France. “We'll have an announcement about something soon, one way or the other.”

Pelosi said she plans to speak with Mnuchin again Wednesday morning.

Any agreement would likely include a two-year extension of the debt limit and spending levels for fiscal 2020 and fiscal 2021. There will also likely be some type of compromise about whether to count spending on the extra funds lawmakers say is needed to help veterans see private doctors.

Pelosi reiterated Tuesday her view that in addition to “parity” for nondefense and defense spending increases, Department of Veterans Affairs health care funds should be carved out and added on top of the rest.

“The VA  . . .  wasn’t part of the base, and so we’re saying, let’s make an accommodation for some of that VA money because it shouldn't compete with other VA programs,” Pelosi said earlier Tuesday. “I think some of it should be above the cap, and that’s what the discussion is, and we’ll see.”

The White House says the veterans funds are needed but should be accommodated within the regular nondefense budget limits.

“I think they are close, but they've got to work that VA thing out," Senate Appropriations Chairman Richard C. Shelby, R-Alabama, said Tuesday evening. “We're not exuberant yet, but I think next week is important.”

[McCarthy pitches monthlong debt ceiling stopgap, if deal can’t be reached]

Should an agreement not come together, the House’s top Republican suggested lawmakers pass a 30-day extension of the debt ceiling to avoid default in early September.

“We should not leave for August without dealing with that. And I would say if we can’t get this done, we should do a 30-day [stopgap],” Rep. Kevin McCarthy, R-California, told reporters Tuesday. He also said lawmakers ought to stay in town a few days past July 26, when the House is currently scheduled to leave town, if necessary. The Senate is slated to be in session for another week after that.

It wasn’t immediately clear what the mechanics of a 30-day bill would look like, such as waiving the debt limit until a date certain in late September or some other construct.

Pelosi has repeatedly made clear that she won’t support action on the debt limit without also addressing the tight spending caps returning in fiscal 2020 and 2021 under current law.

“We are not interested in a temporary increase in the debt limit,” House Majority Leader Steny H. Hoyer, D-Maryland, said Tuesday.

That view is shared broadly within the caucus, as it provides Democrats with leverage to enact the higher nondefense spending caps that the White House has opposed thus far. “Some are passionate about a debt deal. A caps deal is essential,” House Appropriations Chairwoman Nita M. Lowey, D-NewYork, said Tuesday.

McCarthy stressed that the strong preference on his side was also to do a spending caps deal.

“I don’t think that’s ideal,” McCarthy said of his fallback short-term option. “I’d rather get a cap agreement and a debt ceiling agreement before we leave in July. And I think we are very close to making that happen.”

Hoyer said he’s hopeful a budget caps agreement can be reached “very soon” and that if one is reached in the next few days that it will be on the floor next week.

Mnuchin on Monday said the two parties were close to a deal.

Pelosi declined to say if the House would come back from its August recess earlier than Sept. 9 if an agreement can’t be reached before lawmakers leave town next Friday. “I don’t speculate on what might or might not happen,” she said.

House Budget Chairman John Yarmuth told reporters he isn’t particularly worried about what would happen to the stock market or the economy if Congress leaves Washington for its August recess without a deal on the debt limit.

“Do I have concerns? Yes. Am I seriously concerned? No, because I think this market has proven time and time again that it's willing to put up with a lot of uncertainty," said Yarmuth, D-Kentucky. “I don't think the market thinks that there’s ever a possibility of default.”

In the absence of a comprehensive deal on caps and the debt ceiling, a short-term extension of the debt limit would be the “safer” option, Yarmuth said.

Meanwhile, because of potential opposition from some Democrats on the party’s left flank to higher defense spending, votes from the GOP side are likely to be necessary to enact a deal.

Conservatives’ conditions

The House Republican Study Committee is an important bloc of 145 members who tend to have hawkish views on spending. The group's leadership took a position Tuesday outlining conditions for support of a debt ceiling and caps deal that could be difficult for Democrats to accept.

Conditions include fully offsetting the spending cap increases and the inclusion of long-term “spending control” measures. They also said they’d oppose a deal that “irresponsibly swells the size of the federal discretionary budget,” or the portion that is subject to annual appropriations.

The study committee members specifically warned that the 2018 budget deal “cannot happen again,” criticizing lawmakers’ decision to only offset a fraction of the $358 billion cost over a decade. That was in contrast to the three previous two-year deals, which all raised spending above budget caps established in the 2011 deficit reduction law but “were paid for and contained mandatory and discretionary spending reductions,” the group’s letter said.

Rep. Mike Johnson, R-Louisiana., the RSC chairman, said his group’s terms were “reasonable” and that the White House “largely agrees.”

“I think we’re just deeply concerned and a growing number of members in the Congress are concerned there will be no yield or stop signs for the Congress on spending in the future,” Johnson said.

Positions taken by the RSC’s Steering Committee, which released the letter Tuesday, don’t necessarily bind the entire 145-member bloc to vote a certain way, however.

Lindsey McPherson, Jennifer Shutt, Niels Lesniewski and David Lerman contributed to this report.

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