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Budget Deal Was Rare Moment of Compromise in Washington

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07/27/2019 | 01:03pm EDT

By Andrew Duehren, Catherine Lucey and Kate Davidson

WASHINGTON -- No major policy standoffs. No debt-ceiling brinkmanship. A diminished threat of future shutdowns.

With relatively little drama, White House and congressional leaders this week struck a two-year budget deal that increases spending and lifts the government's borrowing limit.

Insiders attributed the rare moment of compromise in a divided Washington to a bipartisan desire on Capitol Hill to raise spending levels as deficit concerns decline, and to President Trump's wish to reach an agreement that would take him past the 2020 election.

The deal, passed in the House Thursday and headed to the Senate floor next week, suspends the debt ceiling until the end of July 2021. While negotiations -- led by House Speaker Nancy Pelosi (D., Calif.) and Treasury Secretary Steven Mnuchin -- lasted months, they didn't feature the minutes-to-midnight pushing of deadlines that have frequently defined spending talks over the past decade.

In 2011 and 2013, congressional Republicans refused to vote to raise the debt ceiling without first demanding certain policy concessions -- first to reduce deficits and then to strip funding from the Affordable Care Act. As a result of the two crises, the country's credit rating was downgraded, the government shut down, and Congress put into place limits on federal spending that it has then repeatedly voted to surpass.

Efforts to raise the debt ceiling since then -- including the most recent agreement -- have been largely void of that controversy. Still bruised by the government shutdown that ended earlier this year, the longest in U.S. history, lawmakers and aides said both sides sought to avoid another no-way-out way negotiation.

Rising debt and deficits have become less politically urgent in Washington, as some Republicans acknowledge that holding the debt-ceiling hostage hasn't proved effective.

"We've never had a success with negotiating anything for debt-ceiling increases, anyway," said Rep. Mark Meadows (R., N.C.), chairman of the House Freedom Caucus, a group of conservatives that has previously refused to vote to raise the debt-ceiling without concessions. "You look back historically, I don't know that we've ever gotten anything to brag about that."

To smooth out this round of debt-ceiling negotiations, congressional leaders sought to pair it with other must-pass legislation: an agreement to again raise spending levels beyond the limits set in 2011. The Trump administration initially pushed to extend funding for one year at current levels, prompting a strange-bedfellows lobbying campaign from both sides of the Capitol to reach a two-year deal on spending and the debt-ceiling.

Mrs. Pelosi and Senate Majority Leader Mitch McConnell (R., Ky.) agreed at a March 7 meeting that they would seek a two-year deal to increase spending levels above the 2011 limits, according to a person familiar with the meeting.

A two-year deal provided incentives for both parties. Republicans could win increases in military spending and avoid a politically painful stand-alone vote on the debt ceiling, while Democrats could boost funding for domestic programs. Both sides could avoid the uncertainty of a potential default on the debt and the automatic spending cuts that would kick in early next year without an agreement by Oct. 1.

"Everyone's motives aligned at the right time," said Rep. John Yarmuth (D., Ky.), the chairman of the House Budget Committee.

But there were some bumps along the way, in part due to differing approaches from two of the administration's chief negotiators -- Mr. Mnuchin and acting White House Chief of Staff Mick Mulvaney

During two meetings on May 21 the Trump administration, represented by Messrs. Mnuchin and Mulvaney, along with acting Office of Management and Budget director Russ Vought, signaled support for a two-year spending agreement. Mr. McConnell emerged from the first session and said the two sides could have an agreement by the end of the day.

Yet negotiations soon began to falter. Democrats balked at the role of Messrs. Mulvaney and Vought, fiscal hawks who have called for deep spending cuts, in the negotiations.

"If you love Mick Mulvaney, you at least have to admit he's not as effective on the Hill as Mnuchin was, particularly in the House right now," said Sen. Kevin Cramer (R., N.D.)

After a June meeting she considered frustrating, Mrs. Pelosi decided she would no longer work with Messrs. Mulvaney or Vought during the talks, according to a person familiar with her thinking. She later delivered that message to Mr. Mnuchin in a phone call.

"Mulvaney's one of the people who shut down government because they didn't want to lift the debt ceiling, and so he has no credibility on the subject whatsoever. So, I mean, I shouldn't even be engaged in a conversation that has him mischaracterizing," Mrs. Pelosi said at a press conference the next day.

Some Senate Republicans, meanwhile, began to warn about the consequences of maintaining current levels of funding for the military after Mr. Mnuchin said the administration was again considering that possibility.

An estimate from the Bipartisan Policy Center, a Washington think tank, that the U.S. could run out of cash to keep paying its bills on time in early September -- before lawmakers returned from their August recess -- helped accelerate negotiations.

"As we've seen repeatedly, ad nauseum, these decisions only get made when they have to," Rohit Kumar, a former aide to Mr. McConnell who now leads tax policy services at PricewaterhouseCoopers LLC, said. "All this meant was all the posturing just got dispensed with."

Mr. Mnuchin took a leading role as President Trump made clear internally that he wanted a two-year deal to get past the 2020 election, a person familiar with White House deliberations said. Mrs. Pelosi and Mr. Mnuchin began to speak on the phone regularly.

Within a week of the new debt-ceiling estimate, Mrs. Pelosi and Mr. Mnuchin began to close in on an agreement. A final sticking point centered on how to pay for, or offset, the cost of the agreement as the Trump administration pushed for at least $150 billion in cuts as part of the deal.

Conservatives, concerned about rising deficits, began to actively campaign against the agreement. The agreement ultimately called for routine accounting maneuvers that provided for roughly $77 billion in additional savings to partially offset the cost of the agreement, which set spending at $320 billion above limits in the 2011 law.

To Rep. Ben McAdams (D., Utah), who voted against the budget agreement in the House on Thursday, said both parties in Washington have only become less concerned about deficit spending.

"The old way, it would be like telling a smoker to stop smoking, and they say, 'Oh I know it's not healthy, I'm trying to stop,'" he said. "Today it's like, 'Smoking's healthy, what are you talking about? Don't tell me to stop smoking.' "

Mr. Mnuchin held a final conference call with the four congressional leaders on Monday evening to finalize the agreement. Mrs. Pelosi was flying coach back from Detroit during the talks.

After that call, Mr. Trump met with Messers. Mulvaney, Vought and top legislative aide Eric Ueland, and he sent tweets praising the deal while they were with him. "This was a real compromise in order to give another big victory to our Great Military and Vets!" he wrote.

Write to Andrew Duehren at [email protected] , Catherine Lucey at [email protected] and Kate Davidson at [email protected]

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