Congress

Mnuchin says there is a topline agreement on spending caps and debt limit

Treasury secretary says talks continue on offsets and structure of a deal

Treasury Secretary Steven Mnuchin said Thursday that the White House, Senate and House have an agreement on a two-year debt ceiling increase. (Tom Williams/CQ Roll Call file photo)

Treasury Secretary Steven Mnuchin said Thursday that agreement has been reached on spending levels for fiscal 2020 and fiscal 2021 as well as a two-year extension of the debt limit.

“The good news is we’ve reached an agreement between the administration, the House and the Senate on topline numbers for both year one and year two. We’re now discussing offsets as well as certain structural issues. And we’ve agreed as part of that deal there would be a long-term, two-year debt ceiling increase,” Mnuchin said on CNBC’s “Squawk Box.” “So, I think, all of our first choice is to reach an overall agreement and we’re working hard to do that. But if for whatever reason we don’t get there in time, I am encouraging a debt ceiling increase.”

Congressional leaders and the Trump administration have agreed the spending cap increases will be offset, but are now working to figure out if they can get the number, specifics and a structure agreed to before Congress leaves for its August recess, Mnuchin said.

“We’ve agreed that there will be offsets, so now we’re just trying to figure out whether we can get both the number agreed to in time and the specifics and a structure,” Mnuchin said.

Mnuchin said he plans to talk with Speaker Nancy Pelosi again on Thursday.

The White House was pushing to offset roughly half of the cost of raising discretionary spending caps for the next two years. It wants more than $150 billion in money-generating provisions, according to a GOP source familiar with the discussions, far more than what Democrats have put on the table thus far.

Part of the package would likely be an extension, for two years, of automatic spending cuts affecting mandatory programs that don’t require annual appropriations, currently set to expire in 2027. But that would only produce about $35 billion in savings, based on a Congressional Budget Office estimate of the two-year deal struck in 2018.

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

Negotiators were also divided over what a GOP source described as how to maintain “budget discipline” after the discretionary appropriations caps expire at the end of fiscal 2021 under the 2011 deficit reduction law. The White House is considering an extension of the limits beyond their current expiration date.

The administration also wants assurances that Democratic leaders won't use the fiscal 2020 appropriations bills that are later written to the new funding levels to attach partisan policy riders dealing with abortion, border security or other issues considered anathema to conservatives.

“Everyone’s concerned about that, particularly on the Republican side,” said Rep. Jim Jordan, R-Ohio, a former House Freedom Caucus chairman. “A lot of Americans are concerned about their tax dollars going for things that we have for decades prohibited, like the taking of innocent unborn life.”

It wasn’t clear what exact numbers were in play for the new spending caps. House Democrats proposed a framework earlier this year that would boost the limits by $356 billion over two years, not counting add-ons like overseas military funds, money to prepare for the 2020 census and possibly for veterans health care.

The 2018 deal, which covered fiscal 2018 and 2019, added $296 billion to the previous caps for those years; of that figure only $38 billion was offset.

Pelosi Wednesday said negotiators are aiming to have a bill on the House floor next Thursday. Accordingly, Pelosi said, talks would need to wrap up by Friday night in order to post legislative text sometime over the weekend, required under the House’s rule that 72 hours’ notice is necessary for lawmakers to read bills before voting on them.

“When we have an agreement we’ll write it up, and we have to do all of that by Friday evening,” Pelosi told reporters.

Mnuchin declined to discuss a timeline on Thursday, but said that he’s confident an agreement can be reached.

“I don’t think the market should be concerned. I think that everybody is in agreement that we won’t do anything that puts the U.S. government at risk in terms of our issue of defaulting. And I think that nobody wants a shutdown in any scenario. So I don’t think the markets should be concerned. And we’re working hard. We’ll get there one way or another,” Mnuchin said.

Pelosi and Senate Minority Leader Charles E. Schumer spoke with Mnuchin, who is in France for a G-7 finance meeting, by phone for 30 minutes Wednesday, a Pelosi aide said and that they planned to talk to him again Thursday. 

Time is short because the House is set to adjourn for the August break on July 26. Treasury has warned lawmakers that action on the debt ceiling is needed before they leave, since the department could run out of borrowing room in early September, possibly before Congress reconvenes after Labor Day on Sept. 9.

Nondefense funding caps would drop by 9 percent from current-year enacted levels if no deal is reached. Democratic leaders view allowing a debt limit increase through without a spending cap deal attached as costing them leverage later.

‘Particularly senatorial process’

Getting a bill on the House floor next Thursday would enable the Senate to process the measure before that chamber’s summer recess begins August 2.

“We would like to have something on the floor next Thursday so that we can send it in a timely fashion to the Senate so that they can go through their, shall we say, particularly senatorial process to get it done in time before they leave,” Pelosi said Wednesday.

A senior Trump administration official later Wednesday downplayed how close the two sides were, however, saying, “The reality is, we have a way to go."

Pelosi said she didn't know who in the administration made that statement, but noted her conversations with Mnuchin are in a “good place.”

“We’re in a good place. We know what we need to do,” Pelosi said.

She added if the Trump administration doesn’t want to reach a bipartisan deal and allow enough time for Congress to pass it before the summer break begins, then a deal won’t happen.

“Then we won't have it before we leave,” Pelosi said. “It’s up to them.”

One ongoing issue has been Pelosi's demand for extra money — $9 billion in fiscal 2020 and $13 billion in fiscal 2021 — outside of regular spending caps to finance programs for veterans seeking private medical care outside traditional Department of Veterans Affairs facilities.

The program has proven so popular that it is habitually short of cash, and last year President Donald Trump signed legislation that requires additional funds to compete with other discretionary VA resources.

A source familiar with the discussions said the White House was opposed to funding the VA private care program outside of the regular spending caps, and believes there is room within the budget limits to accommodate them.

Lindsey McPherson and David Lerman contributed to this report.

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