By Andrew Duehren and Catherine Lucey
WASHINGTON -- Congress and the Trump administration have agreed on overall spending levels and raising the U.S. government's borrowing limit for two years, though negotiators are still working on how to offset the cost of the spending agreement, Treasury Secretary Steven Mnuchin said Thursday.
Mr. Mnuchin, who is in France for the G-7 finance ministers meeting, made the remarks on CNBC Thursday morning. He has been speaking regularly with House Speaker Nancy Pelosi (D., Calif.), who said on Wednesday that Congress and the administration will need an agreement by Friday to have enough time to pass it before lawmakers leave Washington for the August recess.
Mr. Mnuchin's comments came a day after a senior administration official sought to play down expectations for a speedy resolution, saying "we have a way to go." Mr. Mnuchin stressed that he was speaking daily with Mick Mulvaney, President Trump's acting chief of staff, and Russ Vought, acting director of the Office of Management and Budget. He added that he met with Mr. Trump and Vice President Pence before leaving for the G-7 summit.
Offsetting the cost of the agreement remains a major hurdle in the negotiations, as conservatives look to trim a federal budget deficit expected to balloon to more than $1 trillion during the Trump administration. Democrats will seek to protect spending on federal programs that help low- and middle-income Americans.
On Thursday morning, Mr. Mnuchin said that the spending agreement being discussed covered two years.
"We've reached an agreement between the administration, the House, and the Senate on top-line numbers for both year one and year two. We are now discussing offsets," he said.
The overall spending levels have been shared with lawmakers, who have declined to disclose the precise figures. Senate Appropriations Committee Chairman Richard Shelby (R., Ala.) said the numbers are a "big improvement over sequestration." Without a new spending deal, automatic spending cuts known as sequestration would be triggered early next year, reducing discretionary spending by 10% as compared with fiscal year 2019 levels.
The Trump administration is seeking roughly $150 billion in offsets to any agreement, according to a senior administration official. To achieve those savings, the Trump administration is proposing to Mrs. Pelosi nearly $1.1 trillion in potential offsets, including cutting $574 billion from specific programs and extending the 2011 spending limits by two additional fiscal years to save $516 billion, according to the official. The last budget agreement, passed when the GOP controlled both chambers of Congress, raised spending $300 billion above 2011 levels and included $38 billion in cuts and small revenue increases to partially offset the cost.
The current agreement on overall spending levels expires Oct. 1.
To Republicans in the Senate, totally offsetting the cost of the agreement may not be feasible. Boosting military spending is an priority for many members of the Senate GOP, who recognize that increases in military spending require increases in nonmilitary spending to satisfy Democrats.
"It's hard to conceive of getting the kinds of numbers we want for military and then having an equal increase in nonmilitary, and being able to offset it all," said Sen. Kevin Cramer (R., N.D.)
Beyond that, other Republicans said that offsets remain a relatively minor issue compared with the necessity of increasing the U.S. government's borrowing limit and setting new spending levels by the end of the week.
"The bigger issue is we've got to close this deal," said Sen. David Perdue (R., Ga.). "We're out of time, the bigger issue is that if we don't get it done the cost of it is much much higher."
Lawmakers in both parties have raised concerns about potential rifts in the Trump administration over the offsets. Some have questioned whether Mr. Mulvaney, a former member of the conservative Freedom Caucus in the House who has pushed aggressive spending cuts, could complicate or scuttle any potential deal.
"My worry, here, if Mulvaney tries to be too hard on the offsets side, that we wouldn't come to an agreement," Senate Minority Leader Chuck Schumer (D., N.Y.) told reporters Thursday. "So I'll hope he'll let Mnuchin and us come to the agreement."
Mr. Mnuchin emphasized during his CNBC appearance that the members of the administration were working closely together on the negotiations.
He also reiterated that the U.S. would begin to run out of cash to pay its bills in the beginning of September if the debt ceiling isn't raised, but he sought to calm anxiety in the markets.
"I don't think the markets should be concerned," he said. "I think that everybody is in agreement that we won't do anything that puts the U.S. government at risk in terms of our issue of defaulting. I think that nobody wants a shutdown in any scenario."
White House Legislative Affairs Director Eric Ueland said in an interview that all parties are "working in good faith" and that "we remain optimistic."
"The conversations are robust, direct and honest, and we're hopeful for conclusion as soon as feasible," he said.
Write to Andrew Duehren at firstname.lastname@example.org and Catherine Lucey at email@example.com
(END) Dow Jones Newswires
July 18, 2019 21:14 ET (01:14 GMT)
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