The meeting of top administration officials and congressional leaders of both parties served to kick off what could be months of contentious negotiations ahead of a Sept. 30 government shutdown deadline, which will roughly coincide with when Congress needs to raise the nation’s borrowing limit or risk default.
In reaching for a two-year budget deal, lawmakers and administration officials sought to ratchet back budget brinkmanship for the remainder of President Trump’s term, offering Congress and the White House a fresh start after Trump pushed the nation into a record-long 35-day government shutdown this past winter.
“I don’t want to be too forward-leaning in predicting an agreement, but it seems to me, without exception, everyone would like to,” McConnell told reporters early in the day, as he expressed hopes — ultimately unfulfilled — of reaching a deal by day’s end.
“A negotiated agreement with the House Democrats is the best of three alternatives, the other two being arguing back and forth over the length of a CR for God only knows how long, or a sequester, which hits defense with about a $71 billion cut at the end of the year,” McConnell said, adding that he’d delivered this message to Trump.
A CR is a continuing resolution that extends spending at existing levels. The sequester is a set of stringent budget caps that would snap into place early next year absent a spending deal.
Participating in Tuesday’s two meetings along with McConnell and Schumer were House Speaker Nancy Pelosi (D-Calif.), House Minority Leader Kevin McCarthy (R-Calif.), acting White House chief of staff Mick Mulvaney, Treasury Secretary Steven Mnuchin and acting budget director Russell Vought.
The second meeting adjourned without an agreement, but the leaders plan to meet again soon, according to a Democratic aide who was not authorized to discuss the negotiations and so spoke on the condition of anonymity.
McConnell said the focus was on a two-year agreement that would run through Sept. 30, 2021. It would include suspension of the nation’s borrowing limit, which must be raised sometime this fall to avoid a financial calamity.
A deal, if ultimately agreed to, would establish overall spending levels for the next two years. Such a development would reduce the chance of a government shutdown in that time frame, but it would not eliminate the possibility since Congress would still need to pass individual spending bills to fund each agency.
Schumer sounded optimistic about the talks when he addressed reporters earlier in the day, though he stopped short of joining McConnell in predicting a deal by day’s end.
“Trust but verify; we’ll have to wait and see, and obviously we need the president to publicly sign off on whatever we agree to,” Schumer said. “But I think they realize, the Republican leadership and the White House, that . . . when President Trump shut down the government and our Republican friends went along with that, it didn’t serve them very well. So I think that’s what’s pushing them to a serious negotiation.”
After the second meeting, Schumer suggested that a hang-up for Democrats was domestic spending. Typically in budget talks Democrats push for higher domestic spending levels and lower levels of Pentagon spending, while Republicans aim for the reverse.
“We’re trying to come to an agreement, and one of the biggest questions is how to fund all of the needs of the middle class on the domestic side,” Schumer said.
Another critical issue is the debt ceiling, which Congress suspended in February 2018 but was reimposed this past March. The Treasury Department is taking measures to ward off any missed payments, but budget experts say it can do this only until October or perhaps November.
If Congress doesn’t act by then, the Treasury Department could be forced to prioritize payments and fall behind on some of its obligations. Many people say this would cause a stock market crash, a spike in interest rates and potentially a global financial crisis.
The debt ceiling must continually be raised because the government spends more money than it brings in through revenue, and it borrows money to cover the difference by issuing debt.
Budget caps put in place during the Obama administration restrict the amount of money Congress can appropriate for military and nonmilitary programs. Many Democrats and Republicans have sought to remove or change these caps, known as the sequester, to prevent big contractions in programs such as housing, transportation, environmental protection and tax collection — as well as Pentagon spending, a priority for Republicans and the White House.
A few months ago, White House officials signaled that they wanted to keep these caps in place as a way to shrink the budget, and they planned to expand defense spending through a controversial budget maneuver. But behind-the-scenes negotiations led White House officials to soften their stance in recent weeks, as it became clear that Democrats would not support their agenda.
Republican congressional leaders, including McConnell and Senate Appropriations Committee Chairman Richard C. Shelby (Ala.), have made the case directly to Trump in recent days for lifting the budget caps, noting that not doing so would result in huge cuts to defense spending.
“We’re all for trying to rein in spending, but at what cost?” Shelby said Monday evening after meeting with Trump. “And I don’t think the president wants to rein in spending at the cost of national security.”
The discussions are fluid, but they appear to target the most comprehensive budget package in recent years. And they stand in sharp contrast to the clash between Trump and Democrats last year that led to the 35-day partial shutdown of numerous federal agencies.
After calling for major cuts to the budget several months ago, Trump has in recent weeks touted areas where he wants to expand spending. He has called for more money to build a wall along the Mexico border, more funding for the Special Olympics and more money for the military, among other things.
Republicans for years pushed aggressively to shrink the budget, leading to big fights during the Obama administration. But during the Trump administration they have largely backed the president’s call to increase spending in order to cut deals with Democrats and dramatically increase the Pentagon’s budget. The deficit, which represents the gap between spending and revenue, has risen each year of Trump’s presidency and is projected to near $1 trillion this year.