Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer and House Minority Leader Kevin McCarthy have agreed to begin negotiations on a two-year deal to lift stiff budget caps, according to multiple sources familiar with the talks.
The “Big 4” congressional leaders will meet with top White House officials next week to formally kick off the discussions, which have the support of President Donald Trump, said the sources.
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The GOP leaders are also pushing for an increase in the debt limit but do not want to formally link it to a budget caps deal. The issue is sure to be part of next week’s session.
Democrats have wanted to link the debt ceiling increase with the budget caps, believing that would increase their leverage in the negotiations. But McConnell, McCarthy and the White House do not want to handle them together. The federal government will hit the debt limit sometime this fall, according to Treasury Department projections.
Acting White House Chief of Staff Mick Mulvaney, Acting Office of Management and Budget Director Russ Vought, and Treasury Secretary Steven Mnuchin will take the lead for the Trump administration in the negotiations, the sources added.
Trump’s decision to support the talks comes after heavy lobbying from McConnell and McCarthy, who warned the president that failure to reach a spending caps agreement could jeopardize Pentagon spending increases that Republicans have fought to obtain. Without action by Congress and the White House, the Pentagon alone would face a cut of $71 billion under current law. Domestic programs would be slashed $55 billion.
Especially for McConnell — who faces a tough Senate map in 2020 — a deal to steer clear of another government shutdown this fall is critical. McConnell worked hard to avoid the partial government shutdown last December, only to see conservatives successfully lobby Trump to reject a stopgap bill that didn’t include funding for his border wall and trigger the 35-day crisis.
Within the White House, officials have debated whether to pursue a budget deal with Democrats or seek to cut spending in an appeal to conservatives, who are alarmed at the $2 trillion-plus increase in federal debt under Trump. Mulvaney and Vought — who have ties to the hardline House Freedom Caucus — opposed a budget boost.
But McConnell and McCarthy have privately pressed Trump to allow them to explore a budget caps agreement with Democrats, saying this is the only way to avoid another lengthy shutdown.
Pelosi and Schumer held Democrats together during that fight and ultimately denied Trump the billions of dollars in new funding for his wall. After Trump folded and reopened the government, he declared a national emergency and diverted already-appropriated Pentagon funds for the wall project, a move that infuriated Democrats who have challenged it in federal court.
The concerted effort by Republicans to begin talks is a relief to Democrats in both chambers, who have been privately worried about the possibility of a disastrous fiscal cliff this fall.
Congress and the White House need to stave off more than $100 billion in across-the-board cuts, a lingering effect of the Obama-era sequester law.
Separately, they must also reach an accord to lift the nation’s debt limit or risk a full-scale credit crisis.
Both deadlines will reach a boiling point around the same time that Congress must pass its annual spending bills in the fall — risking yet another government shutdown over the wall.
The White House had initially resisted talk of another massive deal to lift Congress’ spending caps, a move that could cost as much as $350 billion over two years.
A group of conservatives, led by members of the House Freedom Caucus, have already begun urging the Trump administration to reject any kind of budget deal.
In a letter to Pelosi this week, a group of 30 House Republicans called to keep the spending limits in place.
“Congress should hold overall spending to the caps levels already in place,” they wrote. “Hold to the caps, budget like American families do every day, and let’s work on a bipartisan basis to ensure a bright future for our sons and daughters.”
Yet Trump himself appeared open to a deal earlier this week. Trump left a meeting with McConnell on Tuesday seemingly open to a deal with Democrats, after McConnell again laid out the case for averting the budget cuts.
McConnell also met privately with Mulvaney and Mnuchin on the matter on Thursday.