Debt ceiling: Final details of a budget deal are emerging but nothing is on paper yet

The bottom line, however, is that there is no deal. There is no agreement. The full details of this, according to sources involved in this process, haven’t even been put onto paper yet. But Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin have hammered through the final outstanding pieces of the ongoing talks. Now they need everyone else involved to agree with its structure — and the clock is ticking.

President Donald Trump described the ongoing talks as “good” as the deadline looms.

Speaking Monday in the Oval Office, Trump said the administration was having “very good talks” with Pelosi, Senate Minority Leader Chuck Schumer, Senate Majority Leader Mitch McConnell and House Minority Leader Kevin McCarthy.

“We’re doing very well on debt,” Trump said. “I think we’re doing very well on a budget.”

The stakes

Pelosi and Mnuchin have been racing against the clock to get something agreed to, and voted on, in the House of Representatives before the end of this week. The urgency was sparked by Treasury Department projections that US may run out of money in early September, which would be before, or just days after, lawmakers returned from their August recess.

But any long-term agreement to raise, or in this case suspend, the debt ceiling was always also going to have to address the looming $126 billion in automatic spending cuts set to take effect in January.

The draft agreement would do both of those things, seemingly addressing the desire on both sides of the aisle to take a potential self-imposed, and catastrophic, crisis off their plates.

But the broad outlines have long been understood and, generally, agreed upon. It’s the details that have taken days to iron out — and still haven’t been locked in yet.

Details from the developing agreement

As noted, the debt ceiling would be suspended for two years — the official date would be July 31, 2021, according to two people involved in the talks. This would be a very big deal as it would take the issue off everyone’s plate until after the election and would give the new Congress plenty of time to deal with it in 2021.

The budget agreement would span two years, and the spending increases will achieve the sought after “parity” — i.e. on the topline, which was agreed to last week, they will be equally distributed between defense (a GOP priority) and domestic (a Democratic priority) spending. This tracks with how past deals have ended up.

The final sticking points

There have been two major outstanding issues that have been at the crux of the talks between Pelosi and Mnuchin.

First, how much of the agreement, which would significantly boost spending over two years, would be offset.

Offsets will be limited — the number will end up between $75 and $80 billion, per the people involved. The White House requested $150 billion in offsets, and sent a menu of $574 billion in cuts to serve as options. That was roundly rejected by Democrats and the compromise number won’t come from direct cuts to domestic spending, the people said. This has been the central point of disagreement throughout the last week or so, and will still rub conservatives the wrong way. The Republican Study Committee, a large block of House conservatives, made clear they had serious problems with the emerging outlines of this deal last week, and the latest numbers won’t change that.

That said, CNN’s Sarah Westwood reported that the White House saw the writing on the wall on this one over the weekend and realized they’d have to compromise down. How the fiscal hawks inside the White House, including acting White House chief of staff Mick Mulvaney and acting Office of Management and Budget Director Russ Vought, deal with this, and how it’s presented to the President, will be make or break.

The second sticking point will be on riders and transfer authority. The administration has been steadfast on receiving a commitment that Democrats not attempt to add policy restrictions onto spending bills, and most notably, would not be able to block or restrict transfer funding for the border wall. Sources say this hasn’t been finalized yet, but it’s being presented as if this would be what the White House would get in exchange for the limited off-sets.

The warning

To be clear however — the deal being hashed out isn’t final, sources involved said. The structure of what is being circulated right now isn’t all that different than where negotiators have been for a few days. It’s whether the above sticking points are resolved to everyone’s satisfaction. Then it’s about what ends up on paper.

In other words, there are a lot of steps to go here. But this is the last real shot at a sweeping deal given the timeline lawmakers are working on.

What to watch today

  • Whether all parties sign off on the proposed agreement.

The clock

Pelosi made clear throughout last week she wanted an agreement by the end of the week in order to process and move legislation through the House before it departs on July 26 for five weeks.

In reality, the House (unlike the Senate), can move very quickly on legislation when it’s under the gun. That’s not the preferred route, especially on an agreement of this scope and scale, but it’s possible.

Needless to say, negotiators want something agreed upon, made public and turned into legislation as quickly as possible to lock in a House vote before Friday.

The dynamics

The structure of this potential agreement will upset members on both sides of the aisle — and a certain powerful component of the White House negotiating team.

For Pelosi and Democrats, limiting any authority to restrict or block administration policy priorities through the appropriations process is a big deal, and a tough pill for members, particularly progressive members, to swallow.

That said, the spending increases on the domestic side are a big deal — and the lack of spending cuts to offset those is quite a win for Democrats as well.

Pelosi, sources say, has been working on laying the groundwork for this agreement with progressives in the caucus.

For Republicans and the White House, the lack of spending cuts to offset the cost of tens of billions in increased spending is going to cause elements of the House and Senate GOP conferences to automatically oppose any final agreement. That was likely always going to be the case, however, with the increases in defense spending serving as enough of a reason for enough Republicans to sign off and get it across the finish line. But that doesn’t account for the fact two key players inside the White House — Mulvaney and Vought — have been sharply opposed to major domestic spending increases without offsets (or, to be honest, they’ve generally opposed the domestic increases period).

The big question, given where the opposition would come from on this, is whether the President will be on board. His signoff on anything would clinch the passage of any budget agreement. His opposition would be devastating.

If something finally does get locked in and turned into legislation, watch the House Republicans. Democrats could conceivably pass any agreement in their chamber without GOP help, but a mass House Republican revolt has people involved very concerned. The effect that could have on the President would be, in the words of one GOP source involved: “disastrous.”

This serves as a good way of making clear: this isn’t done yet. There are both policy details that are outstanding, political calculations still being made and whip counts that haven’t even started yet. The lead negotiators want something locked in as soon as possible. But it’s far from smooth sailing heading into a huge week.

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