Debt ceiling talks progress but time running out

Posted at 7:40 AM, Jul 17, 2019
and last updated 2019-07-17 15:17:20-04

Everyone on Capitol Hill — Republicans and Democrats, leaders and chairmen and chairwomen — is saying the right thing publicly about the efforts to reach a sweeping two-year budget and debt ceiling agreement.

Behind closed doors the negotiations have progressed to a point where an agreement is possible. But being close to an agreement isn’t an agreement, and the clock is quickly becoming the enemy of a long-term resolution.

Bottom line: The happy talk coming from all corners is, according to people directly involved in the talks, merited. But there is still significant skepticism that everyone will sign off on a sweeping deal before the House breaks for August recess — which means shorter-term alternatives are waiting the in the wings. The decision on that front — either to take a final swing for the fences on a broad deal, or the scale back — will need to be made in the next 24 hours.

The clock: The House has exactly five legislative days left in session before its August recess. Treasury Secretary Steven Mnuchin has requested the chamber pass a debt ceiling increase or suspension before departing in order to avoid a scenario where the US government, quite literally, runs out of money before Congress returns in September.

House Speaker Nancy Pelosi told CNN on Wednesday that if an agreement is to be reached, it needs to be done by “preferably the end of the week” so the House can process it by regular order. When asked if she would have a deal by end of day, she replied, “I don’t know.”

She told reporters later Wednesday that she would like to have legislation on the floor by next Thursday, which would mean legislation must be drafted by Friday.

Pelosi and Senate Minority Leader Chuck Schumer spoke with Mnuchin by phone Wednesday.

Negotiations at this scale, with these stakes, are difficult and complicated, and they have their ups and downs, but according to people involved on both sides, since Mnuchin and Pelosi started up the current round last week, things have progressed in a pretty steady manner throughout.

An interesting twist: Mnuchin is at a meeting of G7 finance ministers in France, which isn’t super timely given his role in the talks. But people involved say it shouldn’t negatively impact things, at least for the moment — and his calls with Pelosi will continue. It will be interesting to see if this eventually becomes an issue, but for now congressional negotiators seem unconcerned, beyond the general inconvenience.

Pelosi dismissed the idea that Mnuchin’s travel would impact talks.

“They have phones, you know,” Pelosi responded when reporters asked about it Wednesday.

Translation: All sides, after much back and forth, have a very clear idea of what the contours of a deal looks like, and they’re on the brink. But they aren’t there yet. And there’s a reason for that.

How you know things are close

For more than a week the talks were between Pelosi and Mnuchin, with a tight group of congressional leaders and staffers looped into the details. That group has now expanded substantially. Pelosi met with Appropriations Chairwoman Nita Lowey of New York on Tuesday night. Budget and appropriations staffers, always involved to some degree, are fully engaged to work through various proposals and options. This work is crucial — and is where the meat of any agreement comes from. But this is also the most difficult, technical and often deal-breaking piece of any final agreement.

How you know things might not get there: The work of the above group takes time. The primary outstanding issues have been based on how to finance at least a portion of the budget agreement, or in congressional parlance, finding pay-fors or offsets. As close as negotiators are on the topline numbers, it’s agreeing to the scope, and structure, of those that takes the most time — and not just on policy or political grounds, but on sheer production grounds, these things take time to actually put together.

On a short-term off-ramp

Pelosi has been crystal clear that she will not accept a short-term agreement — a point she repeated Wednesday — and House Majority Leader Steny Hoyer said if a broad agreement is not reached, the House won’t address the debt ceiling before it leaves town next week. This is the public position, and certainly rank-and-file House Democrats are echoing that point, but observers should view this position with some skepticism. Leaving town for a month and coming back with just days to address the debt ceiling before the government runs out of money is the polar opposite of how Democrats have handled the debt ceiling for years. And it would be a major, major problem for markets.

An idea that is out there: People involved say one way out being considered by both sides is an agreement in principle on the budget caps that sets a timetable for lawmakers to take action on it when they return from recess, in exchange for a debt ceiling increase.

Again, Pelosi has said publicly she’s opposed to short-term options, but that is also a negotiating position designed to keep pressure on the administration.

The always wild-card

Republican lawmakers repeatedly said Tuesday they believed Mnuchin, who has been deputized to lead the negotiations, speaks for the President Donald Trump and wouldn’t agree to anything that the President wouldn’t sign off on. But there remains very real concern that Mnuchin may be leading the talks, and may be able to get them right to the brink of a deal, but can’t actually lock the final agreement down. The dynamics of the White House negotiating team have always been a subject of fascination, and consternation, in both parties on Capitol Hill. Mnuchin has largely put that to bed for the last week, but it’s re-emerging as things get close. Keep an eye on that factor in the next day or so.

This story has been updated with additional developments Wednesday.