Mnuchin: Accord hit on debt cap
WASHINGTON — Treasury Secretary Steven Mnuchin said Thursday that negotiators have reached an agreement on the core elements of a deal to increase the government’s borrowing cap and set a $1.3 trillion overall level for the agency budgets that Congress passes each year.
He told CNBC’s Squawk Box that talks with House Speaker Nancy Pelosi, D-Calif., have settled on a debt-limit increase that would cover two years. There was agreement also
on spending levels, but he did not go into detail.
Still to be resolved are offsetting spending cuts to help finance the deal and other “structural issues,” Mnuchin said. President Donald Trump’s administration is pressing for up to $150 billion in such cuts, well above a figure that would be easy to quickly negotiate.
“The good news is we’ve reached an agreement between the administration, the House and the Senate on top line numbers for both year one and year two,” Mnuchin said, speaking from France, where he was at an economic summit. “We’re now discussing offsets as well as certain structural issues, and we’ve agreed as a part of that deal there would be a long-term two-year debt ceiling increase.”
At issue are two separate but pressing items on Washington’s must-do agenda: increasing the debt limit to avert a first-ever default on U.S. payments, and acting to set overall spending limits and prevent automatic spending cuts from hitting the Pentagon and domestic agencies in January.
Pelosi and Mnuchin spoke by phone again Thursday, Pelosi told reporters.
“Our conversations are continuing. We’ve been very firm though about a decision. If they want us to have this done by before we leave, we have to come to a conclusion pretty soon,” Pelosi said.
Reaching an agreement also eliminates the possibility of a repeat government shutdown when the current budget year ends Sept. 30. That partial shutdown lasted a record 35 days last December and January.
“Nobody wants a shutdown in any scenario,” said Mnuchin, who is taking the lead for the administration in negotiations.
Conservative forces in the White House and among House Republicans do not like the way the deal is shaping up.
Democrats, Senate Republicans, and pro-Pentagon Republicans form the core of a coalition favoring a deal. But some House conservatives are wary of the emerging agreement and warn that Trump may reject a deal that doesn’t have their support. The alternative is to run the government on autopilot, a prospect that alarms the Pentagon and its allies.
“If we can get a decent number and a two-year deal and all the stability that goes with that — and if we can do that now — that will be more valuable than a somewhat higher number … in December,” said Rep. Mac Thornberry of Texas, top Republican on the House Armed Services Committee.
The talks have gone on for weeks but took on new urgency as deficit estimates worsened, creating an unacceptable risk of default in early to mid-September. Mnuchin said the risk of a debt default in September is relatively low, limited to the Treasury Department’s “most conservative scenario.”
MULVANEY’S ROLE
Congressional negotiators from both parties have been increasingly working with Mnuchin rather than Chief of Staff Mick Mulvaney, who has made his name in the House as an ardent opponent of federal spending.
Lawmakers have been blunt about their distrust of Mulvaney, a founder of the hard-line House Freedom Caucus whose political career was shaped by crusading against the type of deal the White House and Congress are now seeking. Senior officials on Capitol Hill involved in the budget talks describe him alternately as a “problem child” or a “troublemaker” or just “not helpful.”
Senate Democratic leader Charles Schumer said his worry is that “if Mulvaney tries to be too hard on the offset side” it will kill chances for a deal. “So I hope he’ll let Mnuchin and us come to the agreement, and I think we could get it quite soon.”
A former congressman from South Carolina, Mulvaney came of age politically during the tea party movement, helped orchestrate a government shutdown during President Barack Obama’s tenure and has expressed doubts about what virtually all economists say would be the dire consequences of defaulting on government debt. Giving him a seat at the budget talks, lawmakers say privately, is like putting an arsonist at the table to establish a fire prevention plan.
“This is a man who never voted for an appropriations bill,” said Sen. Patrick Leahy, the top Democrat on the Senate Appropriations Committee. “He doesn’t bring a great deal of credibility to it.”
Wall Street analysts are also watching Mulvaney warily. Henrietta Treyz, the economic policy director at Veda Partners, a market analysis firm outside Washington, wrote in a note to clients this week that the threat of a presidential veto and Mulvaney’s hawkish views were the most significant risks to a deal falling apart.
Two administration officials acknowledged that Mulvaney’s diminished role in the budget negotiations could be in response to the bipartisan contingency on Capitol Hill that does not want him there. Mulvaney was seen poorly by those legislators, White House officials suggested, because they want to spend more than he does.
Like Pelosi, Sen. Mitch McConnell, the majority leader, has also singled out Mnuchin as the preferred lead negotiator.
“By all accounts, Secretary Mnuchin is very outcome driven and that’s what this is about,” said Antonia Ferrier, a former top aide to McConnell. “He’s uniquely positioned to work this through, because he’s dispassionate, he listens, he’s respected and he’s not playing games.”
Aides to Mnuchin and Mulvaney say the two men have a constructive working relationship, but that their backgrounds, ideologies and negotiating styles starkly differ. Stephanie Grisham, the White House press secretary, said “The president has confidence in his team and the progress that is being made.”
Information for this article was contributed by Andrew Taylor of the The Associated Press; by Saleha Mohsin, Erik Wasson, Justin Sink, Daniel Flatley and Alexandra Harris of Bloomberg News; and by Emily Cochrane, Alan Rappeport and Maggie Haberman of The New York Times.