Senate Republicans and the Trump administration are struggling to reach an agreement on a path forward on critical budget and spending issues, threatening not only another government shutdown and deep spending cuts but a federal default that could hit the economy hard.
GOP leaders have spent months cajoling President Trump in favor of a bipartisan budget deal that would fund the government and raise the limit on federal borrowing this fall, but their efforts have yet to produce a deal. And the uncertain path forward was underscored a few days ago at the Capitol, when a budget meeting between key Senate Republicans, including Majority Leader Mitch McConnell (R-Ky.), and senior White House officials left out Democrats, whose votes will be imperative to avoid a shutdown and an economy-shaking breach of the federal debt limit.
“We’re negotiating with ourselves right now,” said Senate Appropriations Chairman Richard C. Shelby (R-Ala.). “The president, the administration, has some views, maybe, that are a little different sometimes than the Senate Republicans have. So we’re trying to see if we can be together as best we can.”
The GOP dysfunction — coupled with a new House Democratic majority with its own priorities — leaves the sides much farther apart than they were at this point in last year’s budget process, which ended in a record-long government funding lapse. At the time, Republicans controlled both chambers of Congress, but negotiations stalled over funding Trump’s immigration priorities.
Trump and Congress face a trio of difficult budget issues. Congress must pass, and Trump must sign, funding legislation by Oct. 1 to avoid a new shutdown. They need to raise the federal debt limit around the same time, according to the latest estimates. Failure to do so would force the government to make difficult decisions about which obligations to pay, and could be considered a default by investors, shaking markets and an economy already showing some signs of alarm.
And by year’s end, they also need to agree on how to lift austere budget caps that will otherwise snap into place and slash $125 billion from domestic and military programs.
Senate Republicans and the administration thus far have not agreed on how to proceed on any of the issues, making it all but impossible for them to enter into substantive negotiations with Democrats. That has left the Capitol in a state of suspension over what the coming months will hold.
“True to form, Congress and the White House seem to be intent on waiting until the absolute last minute to address all these issues that we’ve known about,” said Maya MacGuineas, president of the nonpartisan, nonprofit Committee for a Responsible Federal Budget. “Basically everything they could do wrong, they are doing wrong.”
Tensions between key Senate Republicans and White House acting chief of staff Mick Mulvaney have been on display for months, and GOP lawmakers and aides partially blame that frayed relationship for the halting pace of talks. Mulvaney was a member of the conservative House Freedom Caucus before he joined the administration, first as White House budget director before becoming acting chief of staff, and he has advocated dramatic spending cuts opposed by lawmakers of both parties.
Mulvaney has been slow to come around to the need for a bipartisan budget deal that would raise domestic and military spending caps, even after McConnell met privately with Trump last month and got the president’s blessing to proceed with such a deal, said a senior GOP Senate aide who spoke on the condition of anonymity to describe private conversations.
“The problem with Mulvaney is sometimes he forgets he’s a staffer now, so he’s looking to execute on his own vision instead of the president’s, and that slows down the process,” the aide said.
A Mulvaney spokesman did not respond to a request for comment on his relationship with Senate Republicans. But an administration official, speaking on the condition of anonymity to describe internal thinking, said that Trump has encouraged McConnell to get a good deal but has not offered a blanket agreement for a budget agreement that would raise domestic spending to levels that Senate Republicans might be able to accept in order to cut a deal with Democrats — but that could cause heartburn for the White House.
What those spending levels should be remains a point of contention between Senate Republicans and the administration, according to lawmakers and officials on both sides, and it’s unclear when or how resolution will be reached. According to administration officials and Senate GOP aides, Mulvaney and the administration favor continuing existing spending levels or striking a one-year deal, over reaching the kind of two-year deal that has been agreed to in the past and that lawmakers in both parties favor now.
The administration also has pushed for raising the debt limit as soon as possible, while House Speaker Nancy Pelosi (D-Calif.) has made clear that a vote on the debt limit is off the table until a spending deal is reached. Senate Republicans, too, favor including the debt limit in a broader spending deal, but some complain that they still don’t know exactly what the White House will support when it comes to any of the financial issues they’re confronting.
“I think that’s what we’re trying to find out,” said Sen. John Thune (S.D.), the No. 2 Senate Republican. “Our members are ready to move, but they don’t want to move unless the White House is on board with all of the above.”
Senate Republicans and top aides have voiced frustrations with Mulvaney publicly and privately in recent weeks, with Shelby being particularly caustic in discussing Mulvaney’s involvement in talks about a massive disaster aid bill that became law earlier this month after weeks of stalled negotiations. At one point Shelby was asked whether Mulvaney was playing a “constructive role” in talks, and he said that Mulvaney was playing “a role.”
Shelby also requested Mulvaney’s presence at his own meeting with Trump last month so that Mulvaney could hear Shelby describe the dire impacts if a budget deal is not reached. And after this week’s meeting with Mulvaney, Treasury Secretary Steven Mnuchin and others, Shelby simply said of Mulvaney’s posture in negotiations: “He was there.”
The frustration with Mulvaney is bipartisan. At a news conference this past week, Pelosi suggested she was skeptical of dealmaking “when Mick Mulvaney takes the lead,” referencing his role while in the House in provoking a government shutdown in 2013. “Mick Mulvaney was one of the leaders in shutting down government when he was here and voted to keep it closed,” Pelosi said.
The internal GOP disarray has provoked repeated criticisms from Democrats who blame Republicans for the failure of an attempt at high-level bipartisan talks last month, although Republicans say Democrats were to blame for refusing to budge on spending levels.
“Let’s hope the Republicans can get their act together,” Senate Minority Leader Charles E. Schumer (D-N.Y.) said in a brief interview on Capitol Hill recently.
The finger-pointing has transformed Congress’ most basic mandate of funding the government into a high-stakes blame game with potentially devastating consequences. If new spending bills are not passed before Oct. 1, the government will shut down, just as it did this past winter for a record-long 35 days when Democrats refused Trump’s demands to pay for his wall along the U.S.-Mexico border. In one measure of just how many contentious issues lie ahead, funding for the wall, which is certain to be a hot-button issue again, has barely begun to be negotiated between the parties.
At the same time, if a deal is not reached to lift automatic spending caps known as the “sequester,” the resulting automatic cuts would indiscriminately slash vital domestic programs and jeopardize military readiness, members of both parties warn. And the Treasury Department is already employing cash-saving tactics, called “extraordinary measures,” because Congress has failed to act to raise the nation’s borrowing limit, often called the debt ceiling.
If Congress does not act and Treasury runs out of money, which is forecast to happen sometime in late fall, Treasury would be unable to pay all of its bills on time, which could lead to a default on the government’s obligations, a spike in interest rates, a surge in unemployment and a stock market crash. Fitch Ratings warned earlier this year that a shutdown coupled with a battle over the debt limit might damage the country’s Triple-A credit rating.
Lawmakers and administration officials say they are aware of the urgency to act. But recent interactions between Congress and the White House have not been confidence-inspiring. The sweeping $19 billion disaster aid bill that recently became law did so only after months of partisan bickering, and an emergency spending request for the migration crisis on the southern border also has stalled amid partisan disputes, despite urgent warnings from the administration that agencies will run out of money to deal with the influx at the end of this month.
House Democrats have gone their own way on spending bills without Republican buy-in, putting a massive $983 billion appropriations package for the Health and Human Services Department, the Pentagon and other agencies on the floor at spending levels Senate Republicans and the White House would never agree to. A bipartisan agreement in the Senate that helped Congress make unusual progress passing spending bills last year — up until the dispute over the wall — has not been resurrected this year, and the Senate Appropriations Committee has not yet passed a single spending bill.
And it all comes against the backdrop of an intensely partisan debate over impeachment and a looming presidential campaign, which Shelby called “collateral issues” that only compound the difficulty of reaching agreement. The result is a messy stew of issues that has longtime lawmakers questioning whether Congress and the Trump White House are up to the job of steering the nation away from fiscal calamity.
“This is one of the most basic requirements of governing,” said Sen. John Cornyn (R-Tex.), “is figure out what the government’s going to spend.”