No miracle deal

No miracle deal on budget as talks continue

Mitch McConnell's hope to reach an agreement by day’s end remained elusive.

By BURGESS EVERETT, HEATHER CAYGLE and JOHN BRESNAHAN

Congressional leaders and the Trump administration finished a round of breakneck budget talks on Tuesday with no resolution but a commitment to keep negotiating and try to clinch a debt and spending agreement that would avoid fiscal catastrophe.

After meeting for two hours on Tuesday morning in Speaker Nancy Pelosi's office, Senate and House leaders left a second round of discussions in Senate Majority Leader Mitch McConnell's suite still hung up on how much domestic spending will be part of a two-year budget deal and whether new spending will be offset by new revenues or cuts elsewhere, according to a person familiar with the talks.

Mitch McConnell

Senate Minority Leader Chuck Schumer (D-N.Y.) said the leaders and the president are still "trying to get an agreement."

"One of the biggest questions is how to deal with the middle class on the domestic side," Schumer said.

House Minority Leader Kevin McCarthy (R-Calif.) said the parties agreed to meet again but haven’t yet set a date.

"Deals like this take time," he said.

McConnell said earlier in the day that he found the first round of talks "very encouraging" and posited that Congress could clinch a deal on Tuesday. But reconciling the GOP's brawny defense priorities with Democrats' focus on domestic spending is proving to be a complicated endeavor.

Both the White House and the congressional leaders seem to agree that raising both the budget caps and the debt ceiling is better than facing down sequestration's blunt budget cuts in October and a possible default later in the year. And lawmakers said they were eager for Democrats and Republicans to clinch the deal on an overall budget number to avoid the threats of fiscal calamity and set the table for a summer of writing spending bills.

President Donald Trump dispatched Treasury Secretary Steven Mnuchin, acting White House Chief of Staff Mick Mulvaney and acting budget chief Russ Vought to meet with top House and Senate leaders on Tuesday morning, and the leaders met for more than 45 minutes later.

Congressional leaders are all eager to avoid a series of automatic spending cuts known as sequestration that will take place without a new budget deal. While Schumer and Pelosi (D-Calif.) want to stop $55 billion in potential domestic spending cuts, McConnell and McCarthy are worried about $71 billion in defense cuts.

"A negotiated agreement with the House Democrats is better than the alternatives. The others being arguing back and forth about the length of a [stopgap spending bill] for God only knows how long. Or a sequester which hits defense with about $71 billion in cuts at the end of the year," McConnell said.

Mulvaney and Vought have generally been fiscal hard-liners, but Mnuchin has been deputized to lead the negotiations with the congressional leaders, much to the delight of the Hill honchos. Mnuchin appeared to be trying to clinch a deal on Tuesday, a sign of how urgent the discussions are.

"I'm hopeful and optimistic that the secretary of the Treasury is speaking for the president," McConnell said.

Though McConnell asserted after a party lunch with Vice President Mike Pence that it appears "everybody" wants a deal to raise spending caps, Schumer was more cautious on the outlook for an agreement. McConnell courted Trump privately about the need to reach an agreement last week, and Schumer warned that nothing is final until Trump formally endorses any potential deal.

"Obviously, we need the president to sign off on whatever we agree to," Schumer said. "But I think they realize, the Republican leadership and the White House that when President Trump shut down the government, and our Republican friends went along with that, it didn't serve them very well."

Schumer and Pelosi put out a joint statement late Tuesday calling the pair of meetings "productive" but reiterated their demand that any increase in defense spending be matched on the domestic side of the ledger.

"We continue to insist that there be parity in increases between defense and non-defense, and that we adequately fund critical domestic priorities, including the Census and our commitments to our heroic veterans," the Democratic leaders said.

Mulvaney declined to characterize the meetings: “I’m not going to talk about that.” Mnuchin declined to speak to reporters.

Lifting the debt ceiling is also under discussion but is not viewed as integral to a spending deal. The debt limit can likely wait until later in the fall before requiring congressional action. Schumer said the debt ceiling could be part of an overall deal but was not being discussed on Tuesday.

In addition to stopping the spending cuts, most lawmakers want a budget deal to take a shutdown off the table. The 35-day partial shutdown over Trump’s border wall was debilitating for the GOP, and Republicans want to do everything they can to avoid another one.

A two-year budget deal would set a spending target that allows the Appropriations committees in each chamber to devise spending bills before the Sept. 30 government funding deadline. Without that number, lawmakers risk throwing together a catch-all bill this fall that raises the prospect of brinkmanship.

GOP senators that had lunch with McConnell and Pence said they’ve not been briefed on any top line number for annual spending. Two sources expected the blueprint to start from Trump's requested defense spending number of more than $700 billion and increase domestic spending commensurately.

Senate Appropriations Chairman Richard Shelby (R-Ala.) is hoping to get a deal by June to allow his panel to make progress on the 12 annual spending bills. Despite the shutdown, Congress was able to fund about three-quarters of the government through the regular spending process, the strongest showing in years.

“I’d be happy to see a one-year deal. I’d love to see a two-year agreement,” said Sen. Roy Blunt (R-Mo.). “If we go much longer [without a deal], we almost certainly won’t be able to do the [spending] work in the open way we did last year. And the final product will suffer.”