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Pelosi, Mnuchin Speak Again on Debt Limit as Time Runs Short

Bloomberg logo Bloomberg 7/17/2019 Erik Wasson
Pelosi Says Trump Needs Congress for Any Military Action on Iran © Photographer: Stefani Reynolds/Bloomberghie Pelosi Says Trump Needs Congress for Any Military Action on Iran

(Bloomberg) -- House Speaker Nancy Pelosi said she sees “forward motion” after yet more talks with Treasury Secretary Steven Mnuchin to negotiate higher spending levels in a budget deal that congressional leaders want to attach to a bill raising the debt limit before Congress’s August recess.

“We have a clear idea of what we want to agree to and that’s progress,” Pelosi said Tuesday evening. She spoke with Mnuchin twice during the day. 

Recent phone calls between Pelosi and Mnuchin have focused on whether a broader budget deal will be possible before the House is scheduled to leave July 26 for a six-week recess. While Mnuchin has expressed support for a spending compromise with Democrats, he is also leaving open the chance that Congress will have to settle for a narrower bill that just raises the debt limit, even in the short term.

Mnuchin said Monday that under one of the Treasury Department’s scenarios, the U.S. will be at risk of defaulting on payment obligations in early September -- before lawmakers are scheduled to return from their summer recess on Sept. 9.

This underscores the need for Congress to act quickly, with few days left in Washington. Yet the House of Representatives spent much of the day Tuesday debating a resolution condemning “racist” tweets from President Donald Trump. The standoff over the tweets could make a Pelosi-Trump deal harder.

All parties say Congress will act to raise the debt limit before there is a risk of missing payments. And even Republican leaders -- for now -- say that is doable, along with a spending agreement for the fiscal year that begins Oct. 1.

Deals and Obstacles

That discussion to lift budget caps has boiled down to whether $22 billion for a law expanding veterans health care options over the next two years will count as part of government spending on non-defense discretionary programs. Pelosi said earlier Tuesday that at least part of that cost shouldn’t count toward the budget cap.

Senate Appropriations Chairman Richard Shelby, a Republican from Alabama, said a breakthrough on the spending deal could come from a compromise on how much money for veterans’ health is counted toward the budget caps.

“There’s probably a way to get a deal done,” Shelby said Tuesday. “We need it now.”

One potential obstacle to a deal could be Republican demands for offsetting the cap increases with entitlement spending cuts. The Republican Study Committee, a conservative House group, sent a letter to Mnuchin and congressional leaders urging them to include such cuts in their conversation.

Ways and Means Chairman Richard Neal rejected that suggestion, saying Republicans ignored the need for offsets when they passed a tax-cut bill in 2017.

Long-Term Agreement

Top Senate Republicans and Democrats signaled optimism over a deal on Tuesday.

South Dakota Senator John Thune, a member of Republican leadership, said “everybody realizes it’s really important to get a deal” on the debt limit and other issues this month.

Senate Minority Leader Chuck Schumer said Tuesday that negotiations are going “well right now,” and he pushed back on those who are ready to abandon a long-term debt limit and budget caps deal in favor of a simpler short-term fix for the debt ceiling.

“I am hopeful we can get to a long-term agreement to only do this once,” Schumer said.

Some lawmakers, however, were skeptical of the chances for a broader deal.

House Budget Chairman John Yarmuth, who isn’t directly involved in the negotiations, said it’s unlikely that Democrats and Republicans will reach an agreement to lift caps on government spending this month.

--With assistance from Laura Litvan and Daniel Flatley.

To contact the reporter on this story: Erik Wasson in Washington at ewasson@bloomberg.net

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Anna Edgerton, Laurie Asséo

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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