House Speaker Nancy Pelosi said late Tuesday that she’s seeing “progress” in her twin budget and debt negotiations with Treasury Secretary Steven Mnuchin.
“We have a clear understanding of what we want to agree to. And I think that’s progress,” Pelosi told reporters. An aide to Pelosi told CNN on Tuesday that Pelosi and Mnuchin spoke twice during the evening and plan to speak again on Wednesday.
According to multiple people involved or briefed on the discussions, the talks between Pelosi and Mnuchin on a budget and debt deal have been productive and are approaching a point where it’s time to either cut a deal or find an off-ramp that will get the government through a potential cash crunch and prevent another shutdown.
The US government hasn’t been able to borrow since March, when a congressional cap on debt went back into force. Congress and President Donald Trump need to reach a deal before September, when the Treasury Department says it will run out of money.
There are only seven legislative days left before the House leaves for its August recess, so the urgency is real, on both sides.
Earlier in the day, Pelosi reiterated that she would not accept a temporary extension in talks to buy more time ahead of a looming financial crisis – a deliberate effort to keep the pressure on the ongoing talks to secure a wide-ranging budget and debt ceiling agreement.
“I’m not doing a short-term deal,” Pelosi told reporters, repeating her refusal to give up leverage over Trump as the window for avoiding an unprecedented US government default – and an ensuing financial crisis – continues to close.
The bottom line
A compressed timetable and negotiations that haven’t yet expanded to include all the parties who need sign-off aren’t exactly a harbinger of future success. But the effort to find some kind of agreement between Pelosi and Mnuchin has been moving apace for several days, sources say, though a final agreement still hasn’t been zeroed in on at this point.
Alabama Republican Sen. Richard Shelby, who chairs the Senate Appropriations Committee, said Tuesday that the two are “real close” to finding an agreement, echoing Mnuchin’s own comments on Monday.
“We’re closer than we have ever been,” said Shelby, who isn’t part of the negotiating team but has been closely read into the talks.
But there are a handful of difficult issues still to be closed out – both on the policy and on the technical side – said people familiar with the negotiations.
To watch today
Pelosi and Mnuchin spoke for the sixth time in seven days on Monday. A Pelosi aide said the call provided “further clarity to their respective positions.” They are scheduled to speak again on Tuesday.
Mnuchin told reporters Monday that the talks had been “productive” and said that he’s been talking with the President daily about the negotiations.
“Congress has the right to limit spending, but once we agree to spend money, we have to pay for it and the credit of the US government is of the utmost importance,” Mnuchin said. “So the debt ceiling has to be raised.”
He added that he wants a deal done before Congress leaves for August recess.
“There is a preference on both parties, to the extent we can agree on the debt ceiling and a budget deal, that is the first choice,” said Mnuchin. “I think we’re getting closer.”
The dynamics
It’s a rarity on Capitol Hill, but just about everyone involved in these talks agrees that an all-encompassing debt ceiling and budget deal is the preferable route here. The wild cards are the pockets in the administration who want to take a harder line on the domestic spending increases requested by Democrats in this talks. As one GOP senator said Monday: “We could probably get this done in a half-hour if we had the freedom to do so.”
Mnuchin says he wants a comprehensive deal, but if one isn’t reached, has requested a so-called “clean” bill to raise the debt ceiling for as long as possible, allowing the government to begin borrowing and keep things running while a budget agreement is hashed out. That would prevent a default, which would likely throw markets worldwide into chaos to a degree not seen since the 2008 financial crisis. But Pelosi says she wants a comprehensive deal, and doesn’t want any part of a clean debt ceiling vote.
These are their positions and have been their positions now for more than a week. Both repeated those positions on Monday – Mnuchin in a White House press conference, Pelosi to reporters. This is not breaking news. These are their negotiating positions. Pelosi has zero incentive to back off her position, because it drives the pressure to lock in a full agreement.
And the wildcard remains: No one knows where the President and the hardline pro-spending cut members of his team – namely acting chief of staff Mick Mulvaney and acting OMB Director Russ Vought – will be if something does actually come together. That, according to several people involved, is the biggest wildcard from the Capitol Hill perspective.
The short-term options
Short-term options may be out there, but there is a genuine effort to strike a deal, and strike it this week, people involved say.
In fact, one short-term option has already been roundly rejected by congressional Republicans. Democrats late last week floated a one month extension of the debt limit, according to people involved with the talks which – and this is important – did not backfill the Treasury’s ability to utilize “extraordinary measures” to keep the US government afloat.
In other words, it would set a hard deadline, and crystal clear fiscal cliff for the end of September. While the administration was amenable to the idea, congressional Republicans pushed back sharply on setting up such a dramatic – and potentially perilous – deadline.
If – and this remains an if – a short-term scenario is eventually required, people involve expect something longer, like a three-month option – moving a potential crisis into the holiday season, a year after the last federal government shutdown.
The clock
The House is scheduled to be in session for a grand total of seven more days before the August recess. The chamber departs on July 26. That is, to put it bluntly, not an awful lot of time to mess around.
Is it possible recess could be pushed back a week, which would line the House up with the Senate? Sure, but aides, at least at this point, have made clear there’s limited desire to do that. The time to make the deal, in other words, is now.
The players
This is a Pelosi-Mnuchin show at this point, no question about it. But they aren’t the only ones involved. All of the key players are looped in, talking to the president and talking to the Treasury secretary, according to people involved. Staff is providing readouts of conversations and proposals to their counterparts. In other words, everyone at the leadership and leadership staff level is in the loop at this point.
On Friday, Mnuchin sent a letter to Pelosi outlining the dire projection that in at least some of the scenarios modeled by Treasury, the U.S. would run out of money by the beginning of September. He officially requested Congress raise the debt ceiling before the August recess.
On Saturday night, Pelosi sent a letter to Mnuchin saying that while there was agreement on the need to address the debt limit, a spending agreement must also be reached “as soon as possible.” Pelosi outlined her position: more money must be added to the domestic side of the agreement to finance a 2018 veterans care law.
Neither of these letters were a surprise. Both of the recipients knew they were coming and they were, to some degree, choreographed to take public key components of the negotiations that will need support from the administration and Congress.
Oftentimes when elements of private talks are moved into the public sphere via a publicly released letter, it’s done to jam or shame the other side. This, according to multiple people involved, was not the case here. It could turn into that at some point, particularly on the money for the veterans program. But at this point, it was a joint back and forth.
The Trump factor
It’s tough to overstate the role the Treasury secretary has played in getting negotiations back on track, according to multiple people involved, from both sides of the aisle.
He has become the public face of the talks for the administration; he has become the private voice on Capitol Hill for the talks. It is, people involved say, exactly what congressional Republicans wanted, and Senate Majority Leader Mitch McConnell requested. And it is exactly what congressional Democrats – who publicly castigate Trump’s other top negotiators, Mick Mulvaney and Vought, every chance they can get – prefer.
“Everyone just tenses up when they start talking,” one person who’s been in the room said of the two Trump deputies.
Mnuchin, on the other hand, has been described in his talks with lawmakers as even-keeled and willing to listen, firm in the administration’s positions but not dismissive of lawmakers, or, importantly, their staff.
One of the primary concerns remains that while Mnuchin has been deputized to lead the current talks, he doesn’t necessarily speak for the president. Administration officials scoff at that, noting that each time he speaks with Pelosi he reports back to the White House, and he hasn’t made any promises or laid out any proposals that didn’t have sign off.
“We’re operating on his word right now,” one Democrat involved said.
So far, it’s recipe that has led to progress. But negotiating toward an end game isn’t necessarily the hard part. It’s the end game that is. And that’s where both sides want to end up this week.
CNN’s Donna Borak, Lauren Fox and Jeremy Herb contributed to this report.
