House Speaker Nancy Pelosi said over the weekend that she wants to see equal increases in defense and nondefense spending in the budget deal currently under negotiation between Congress and the White House, plus additional money to help veterans see private doctors.
In a letter to Treasury Secretary Steve Mnuchin Saturday, Pelosi said she agrees that Congress must act quickly to raise the nation’s debt ceiling but reiterated her view that a deal on the debt ceiling should be part of the effort to raise the budget caps and set spending levels for 2020 and 2021.
“We all agree on the need to address the debt limit, but we also must reach an agreement on spending priorities based upon the principle of parity as soon as possible,” Pelosi wrote. “The two-year budget agreement we are working to achieve should provide equal increases in the defense base and the non-defense base over the next two fiscal years, but it also must provide $9 billion in additional funds for the VA MISSION Act in fiscal 2020 and $13 billion in additional funds in 2021.”
Why it matters: Pelosi was responding to a letter from Mnuchin Friday that warned that the Treasury could run out of cash in early September if the debt ceiling isn’t raised – at a time when Congress could still be on its six-week August break.
What happens next: The threat of a possible default may create the kind of pressure lawmakers seem to need to get a budget deal that includes raising the debt ceiling done. “We very much doubt that any congressional leader wants to run the risk of being blamed for the economic and financial market chaos that would follow hitting the debt ceiling, but both sides will want to extract the biggest spending concessions from the other as possible,” Ian Shepherdson or Pantheon Macroeconomics wrote Sunday.
“This usually means the negotiations go to the wire, but it now seems that the wire might be much closer than anyone had expected.”
Speaking to reporters Monday, Mnuchin said “we’re very close to a deal but as you know these deals are very complicated.” He also addressed what he expects would happen if the negotiators fail to make a deal before the House is scheduled to leave town on July 26: "If for whatever reason we can't agree to all these issues before [lawmakers] leave, I would either expect them to stick around or raise the debt ceiling" without a budget agreement.
The White House is pushing a plan to raise the debt ceiling on a short-term basis as a fallback option, The Washington Post’s Damian Paletta reported Monday, though it’s not clear that any Democrats or Republicans in Congress have agreed to the proposal or that there would be enough votes to pass such a measure.
