Singapore Markets closed

Deal or No Deal? Pelosi Rejects White House Spending Cuts as Budget Negotiations Continue

Michael Rainey

House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin have put a positive spin on negotiations over the two-year budget deal that would raise the debt ceiling, with the speaker earlier this week sketching a timeline in which the agreement was completed this week and voted on next week, just before the House begins its six-week August recess.

There are signs, however, that the negotiations still face serious hurdles.

Late Thursday, the Trump administration presented Democratic negotiators with a list of spending cuts worth roughly $1.1 trillion, as part of a White House effort to secure $150 billion in savings over 10 years. The list includes:

  • $516 billion in potential savings from extending 2021 spending levels through 2023. This option is reportedly favored by the Republican Study Committee, a large block of conservatives in the House.
  • $574 billion in possible cuts spread across 30 different spending areas, with the largest being an administration proposal to overhaul drug pricing for savings of $115 billion.
  • No cuts to defense spending.
  • No revenue or tax increases.

A Democratic source told Politico that the proposed cuts are not being embraced on their side: “This is the White House’s starting point for negotiations on this aspect. They understand these levels are nonstarters for us. Talks will continue.”

About those cuts: The $150 billion in cuts are considerably larger than the $38 billion in net offsets agreed to in the 2018 budget deal, Roll Call’s Jennifer Shutt noted. But that agreement included $103 billion in total offsets, Shutt said, perhaps putting the administration's demand in the ballpark, or at least close to it.

CNN’s Phil Mattingly said a more realistic goal for offsets is in the $40 billion to $60 billion range.

Budget hawks chime in: The Committee for a Responsible Federal Budget said the 2018 budget deal, which is still in effect, added $420 billion to the debt over 10 years, and if spending continues at those levels, that tally comes to $2 trillion.

Marc Goldwein of CRFB backed the White House’s proposed spending cuts. “$150 billion is 0.3 percent of the budget. If Congress cant cut or find revenue to pay for that much, were in big trouble,” he tweeted Friday.

Calling for any budget deal to be paid for, CRFB said earlier this week: “President Trump last year said in response to a $1.3 trillion omnibus bill that enacted the last spending increase: ‘I will never sign another bill like this again.’ He should enforce this mantra and insist Congress bring responsible budget process back to our nation’s finances, not more debt binging cloaked as bipartisanship that we can’t afford."

A sacred thing? Despite Pelosi’s broad rejection of the White House proposal for spending cuts, President Trump said Friday the negotiations were in “good shape.” Describing the debt ceiling as a “sacred element of our country,” Trump said, “I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge.”

The Mulvaney factor: The proposed cuts reportedly reflect the views of Trump’s acting chief of staff Mick Mulvaney, a fiscal hawk who used the debt ceiling as a political wedge during the Obama administration. The success of the negotiations may depend on how hard Mulvaney pushes his demands for substantial spending cuts.

"My worry here is if Mulvaney tries to be too hard on the offset side that we wouldn't be able to come to an agreement," Sen. Chuck Schumer (D-NY) told CNN Thursday. "I hope he will let Mnuchin and us come to the agreement and I think we can get it quite soon."

What’s next: CNN’s Phil Mattingly captured the tension in the talks Friday: “Negotiators are on the brink of a deal. Now comes the hard part.” A Trump administration official told Bloomberg News that negotiations are expected to continue over the weekend and into next week.

Like what you're reading? Sign up for our free newsletter.