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White House and Congress Reach Agreement on Spending, Debt Ceiling — Update

By Catherine Lucey, Andrew Duehren and Kate Davidson 

Congressional and White House negotiators reached a deal to increase federal spending and raise the government's borrowing limit, securing a bipartisan compromise to avoid a looming fiscal crisis over the demands of conservatives in the House and administration who had called for deep spending cuts.

President Trump in a tweet late Monday said a deal had been struck with congressional leaders.

Earlier in the day negotiators had been discussing an agreement that would increase spending by roughly $320 billion above limits set in a 2011 law, with domestic and military spending raised by equal amounts, according to people familiar with the discussions. It would suspend the debt limit for two years, two of the people said. Nearly $80 billion of the spending agreement will be offset with other savings, according to other people familiar with the matter. Talks on Monday morning focused on technical language, one of the people familiar with the offsets said.

Possible savings under discussion included extending automatic cuts to Medicare as well as extending Customs and Border Protection fees, another person familiar with the offsets said. Both options have been used in previous budget deals. The Medicare cuts, which reduce payments to service providers for Medicare patients, currently expire at the end of fiscal year 2027.

Some conservative House Republicans were asking President Trump to reject any agreement without significant spending cuts, injecting further uncertainty into negotiations toward a deal with just five days to go until the House leaves Washington for its August recess.

Rep. Mike Johnson (R., La.), the chairman of the conservative Republican Study Committee, a group of around 150 conservative Republicans, spoke with Mr. Trump on Saturday about his concerns with the still-developing budget agreement.

"We believe the White House and congressional leadership should be prepared to walk away from this if necessary," Mr. Johnson said in an interview. "I'm encouraged after speaking with the president."

Treasury Secretary Steven Mnuchin, who has led negotiations for the administration, said last week that both sides -- Republicans control the White House and Senate, while Democrats control the House -- had agreed on raising the debt ceiling for two years and setting spending levels but not on how to pay for the increases above limits set in a 2011 law.

Mr. Johnson and other members of the conservative group want the cost of any agreement to be fully offset by other spending cuts and include an extension of the limits set in the 2011 law.

Administration officials have indicated that they want to reach an agreement that will win the support of House Republicans. The Trump administration had indicated that it wouldn't accept less than $150 billion in spending cuts, offering a list of potential offsets that a Democratic aide close to the talks has called "nonstarters."

Looming behind negotiations over spending levels is the federal borrowing limit. Mr. Mnuchin has said the U.S. could run out of cash in early September, before lawmakers return from a summer recess, pressing negotiators to reach an agreement this week. Should the government's ability to borrow become limited, it could begin to miss payments on obligations such as Social Security and veterans benefits or interest on the debt.

House conservatives want the president to follow the advice of acting White House chief of staff Mick Mulvaney and Russell Vought, the acting director of the Office of Management and Budget, both of whom have called for spending cuts. Senate Appropriations Committee Chairman Richard Shelby (R., Ala.) said he is hopeful that Mr. Trump has entrusted negotiations to Mr. Mnuchin.

"I think the secretary has been forthcoming and forthwith and is trying to avoid a catastrophe on the debt limit and also on appropriations," Mr. Shelby said. "I think he has been a voice of reason."

Rep. Chip Roy (R., Texas), who wrote a letter signed by more than 40 House Republicans earlier this year advocating to keep spending within limits set in the 2011 law, said he has spoken with Messrs. Mulvaney and Vought about the negotiations.

"The president should be listening to Mick Mulvaney and Russ Vought, and he should not be listening to Steven Mnuchin, period," Mr. Roy said. He added that his Republican colleagues in the Senate weren't sufficiently committed to cutting spending. "Senate Republicans will never not find a corner where they can go and hide," he added.

This set of spending negotiations isn't the first complicated by differences among Republicans. Last year, a stopgap measure to keep the government open passed the Senate but was rejected by Mr. Trump, who withdrew his support and called on House Republicans to pass legislation with more funding for a border wall. That prompted the longest government shutdown in U.S. history.

More recently, Mr. Trump has shown a willingness to side with Senate Republicans, who have to work with House Democrats to get spending plans through Congress. After months of wrangling over a disaster relief funding, Mr. Trump accepted a compromise to provide additional money to Puerto Rico and address a humanitarian aid package for the southern border separately.

To get Mr. Trump to agree to the disaster aid deal, Sens. Shelby and David Perdue (R., Ga.) called to encourage him to accept the agreement. Two stalwart conservatives, Reps. Jim Jordan (R., Ohio) and Mark Meadows (R., N.C.), were in the Oval Office during the call and urged him to oppose it, according to a person familiar with the conversation.

Initial proposals from the administration to maintain current spending levels for an additional year quickly lost favor with Senate Republicans, who warned about the consequences for increased military spending if no budget deal is reached.

"I think the result of all these different voices is going to mean that the outcome here remains uncertain until the legislation is passed, basically," said Shai Akabas, the economic policy director at the Bipartisan Policy Center, a think tank in Washington.

Write to Catherine Lucey at catherine.lucey@wsj.com, Andrew Duehren at andrew.duehren@wsj.com and Kate Davidson at kate.davidson@wsj.com

 

(END) Dow Jones Newswires

July 22, 2019 18:10 ET (22:10 GMT)

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