President Donald Trump announced Monday evening that a sweeping two-year, $1.37 trillion budget deal has been struck, calling the plan a “real compromise.”
“I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelosi, and House Minority Leader Kevin McCarthy – on a two-year Budget and Debt Ceiling, with no poison pills. This was a real compromise in order to give another big victory to our Great Military and Vets!” Trump said in a series of tweets.
Congressional leaders and the Trump administration signed off on the deal during a conference call.
House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin hammered through the final outstanding pieces of the ongoing talks, but ultimately needed everyone else involved to agree with its structure. Pelosi dialed into the conference call from a delayed flight in Detroit, due to a ground stop at Reagan National Airport.
The rest of the passengers on Delta Flight 1144 had to deplane for almost an hour due to the delay, but Pelosi and her detail stayed on board, with a flight attendant saying the speaker has been on the phone for most of the time.
After Trump’s announcement, Pelosi and Schumer issued a joint statement touting the new domestic spending included in the budget deal negotiated with the White House.
“Democrats secured an increase of more than $100 billion in funding for domestic priorities since President Trump took office,” they said.
They also assert that “after a long negotiation, we have only agreed upon offsets that were part of an earlier bipartisan agreement.”
Speaking Monday in the Oval Office, Trump said the administration was having “very good talks” with Pelosi, Schumer, Senate Majority Leader Mitch McConnell and House Minority Leader Kevin McCarthy.
“We’re doing very well on debt,” Trump said. “I think we’re doing very well on a budget.”
Pelosi and Mnuchin had been racing against the clock to get something agreed to, and voted on, in the House of Representatives before the end of this week. The urgency was sparked by Treasury Department projections that US may run out of money in early September, which would be before, or just days after, lawmakers returned from their August recess.
But any long-term agreement to raise, or in this case suspend, the debt ceiling was always also going to have to address the looming $126 billion in automatic spending cuts set to take effect in January.
The draft agreement would do both of those things, seemingly addressing the desire on both sides of the aisle to take a potential self-imposed, and catastrophic, crisis off their plates.
But the broad outlines have long been understood and, generally, agreed upon. It’s the details that have taken days to iron out.
Details from the developing agreement
As noted, the debt ceiling would be suspended for two years — the official date would be July 31, 2021, according to two people involved in the talks. This would be a very big deal as it would take the issue off everyone’s plate until after the election and would give the new Congress plenty of time to deal with it in 2021.
The budget agreement would span two years, and the spending increases will achieve the sought after “parity” — i.e. on the topline, which was agreed to last week, they will be equally distributed between defense (a GOP priority) and domestic (a Democratic priority) spending. This tracks with how past deals have ended up.
The final sticking points
There have been two major outstanding issues that had been at the crux of the talks between Pelosi and Mnuchin.
First, how much of the agreement, which would significantly boost spending over two years, would be offset.
Offsets will be limited — the number will end up between $75 and $80 billion, per the people involved. The White House requested $150 billion in offsets, and sent a menu of $574 billion in cuts to serve as options. That was roundly rejected by Democrats and the compromise number won’t come from direct cuts to domestic spending, the people said. This has been the central point of disagreement throughout the last week or so, and will still rub conservatives the wrong way. The Republican Study Committee, a large block of House conservatives, made clear they had serious problems with the emerging outlines of this deal last week, and the latest numbers won’t change that.
That said, CNN’s Sarah Westwood reported that the White House saw the writing on the wall on this one over the weekend and realized they’d have to compromise down. How the fiscal hawks inside the White House, including acting White House chief of staff Mick Mulvaney and acting Office of Management and Budget Director Russ Vought, deal with this, and how it’s presented to the President, will be make or break.
The second sticking point will be on riders and transfer authority. The administration has been steadfast on receiving a commitment that Democrats not attempt to add policy restrictions onto spending bills, and most notably, would not be able to block or restrict transfer funding for the border wall. Sources say this hasn’t been finalized yet, but it’s being presented as if this would be what the White House would get in exchange for the limited off-sets.
Pelosi made clear throughout last week she wanted an agreement by the end of the week in order to process and move legislation through the House before it departs on July 26 for five weeks.
In reality, the House (unlike the Senate), can move very quickly on legislation when it’s under the gun. That’s not the preferred route, especially on an agreement of this scope and scale, but it’s possible.
Needless to say, negotiators want something agreed upon, made public and turned into legislation as quickly as possible to lock in a House vote before Friday.
The structure of this potential agreement will upset members on both sides of the aisle — and a certain powerful component of the White House negotiating team.
For Pelosi and Democrats, limiting any authority to restrict or block administration policy priorities through the appropriations process is a big deal, and a tough pill for members, particularly progressive members, to swallow.
That said, the spending increases on the domestic side are a big deal — and the lack of spending cuts to offset those is quite a win for Democrats as well.
Pelosi, sources say, has been working on laying the groundwork for this agreement with progressives in the caucus.
For Republicans and the White House, the lack of spending cuts to offset the cost of tens of billions in increased spending is going to cause elements of the House and Senate GOP conferences to automatically oppose any final agreement. That was likely always going to be the case, however, with the increases in defense spending serving as enough of a reason for enough Republicans to sign off and get it across the finish line. But that doesn’t account for the fact two key players inside the White House — Mulvaney and Vought — have been sharply opposed to major domestic spending increases without offsets (or, to be honest, they’ve generally opposed the domestic increases period).
The big question, given where the opposition would come from on this, was whether the President will be on board. His signoff clinched the passage of any budget agreement.