By Andrew Duehren 

WASHINGTON -- The White House and House Speaker Nancy Pelosi were set to continue talks on Friday over how to pay for a two-year agreement to raise overall spending limits and increase the U.S. government's borrowing limit, aiming to finalize the agreement before the House leaves town next week.

Mrs. Pelosi earlier this week said a deal needed to be reached by Friday to give the House enough time to pass the bill before the start of the House's August break, pressing negotiators to clear the last hurdles toward an agreement.

The Trump administration is seeking roughly $150 billion in savings, or offsets, as part of the spending agreement and proposed to House negotiators a list of $574 billion in potential cuts to various programs Thursday evening, according to a senior administration official. The administration has also suggested extending spending limits set in a 2011 law beyond their expiration after fiscal year 2021 to save $516 billion, according to the official.

Those offers did not appeal to Democrats, and a Democratic aide close to the talks said the proposed cuts were "the White House's starting point for negotiations on this aspect."

"They understand these levels are nonstarters for us. Talks will continue," the Democratic aide said.

Proposed measures to offset the cost of the agreement is the last major hurdle in the talks. Treasury Secretary Steven Mnuchin said on Thursday that both sides had agreed on raising spending levels above the 2011 caps and raising the debt ceiling for two years.

Mr. Mnuchin, who is in Paris following meetings of the G-7 finance ministers, is expected to speak with Mrs. Pelosi and Republican congressional leaders over the phone Friday. He has warned that the U.S. could hit its debt ceiling in early September, before lawmakers return to Washington. Without the ability to borrow, the government could begin to miss payments on its obligations, such as Social Security and veterans benefits or interest on the debt, triggering a potential default.

Lawmakers in both parties have insisted on pairing a vote on lifting the debt ceiling with an agreement on overall spending levels. Without a new agreement to lift spending limits, automatic spending cuts known as a sequester would reduce discretionary spending by 10% early next year.

The last spending agreement, which expires Oct. 1, raised spending by almost $300 billion above limits set in the 2011 law and included roughly $38 billion in cuts and small revenue increases to partially offset its cost.

While negotiators appear close to reaching a deal, any final agreement will need to earn the approval of President Trump, whom lawmakers in both parties caution may not sign on to the agreement reached by members of his administration.

--Kate Davidson contributed to this article.

Write to Andrew Duehren at andrew.duehren@wsj.com

(END) Dow Jones Newswires

July 19, 2019 11:33 ET (15:33 GMT)

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