The High-Stakes Budget Fight Ahead

The High-Stakes Budget Fight Ahead

iStockphoto/The Fiscal Times

Lawmakers returning from their July 4th recess face a potentially messy fight over raising spending caps and the debt ceiling, even as battles over border and immigration policies continue — and an August recess looms just around the corner, limiting time for negotiations.

Politico’s Burgess Everett and Heather Caygle report:

“Congressional leaders and the Trump administration have so far tried in vain to reach a deal that would avoid stiff budget cuts, a government shutdown and debt default in September. And now ugly splits in both parties are threatening to complicate the talks.”

The Republican split: The White House has reportedly pushed for a one-year extension of current funding levels, but lawmakers — including Republicans — have rejected that idea since it would prevent them from shaping spending decisions for the coming year.

“While some members of the Administration have suggested a yearlong CR as a viable path forward, this must be avoided,” 15 GOP senators wrote in a letter to White House budget negotiators last week. “Simply put, our adversaries do not handcuff their militaries with funding gimmicks like continuing resolutions — nor should we.”

The Democratic split: “House Democrats have different views on raising the caps,” Roll Call’s Paul M. Krawzak writes, “with some liberals opposed to a defense increase and some moderates concerned about the overall increase in spending.” Intraparty tensions over the $4.6 billion emergency border funding package passed late last month could make it harder for House Speaker Nancy Pelosi to hold her caucus together. Progressives, angered by the outcome of their fight on the border funding, may seek to reassert themselves in the coming budget battles.

The deadline: Lawmakers will have to agree on a budget plan before the end of September to avoid a possible government shutdown or having automatic budget cuts take effect. Politico’s Everett and Caygle note that, as of today, there are no meetings scheduled for this month between the top congressional leaders and the Trump administration.

For lawmakers long used to governing by crisis and deadline dealmaking, it may still be too soon to re-engage. “I’ve been through this dance previously,” Rep. Mark Pocan (D-WI), co-chair of the Congressional Progressive Caucus, told Politico. “I don’t even think we’re at the point even yet [to reach a deal]. It’s not going to be a July conversation.”

But the deadline to lift or suspend the debt ceiling may come sooner. The Bipartisan Policy Center said Monday that there is a “significant risk” that the U.S. will breach the debt limit in September, revising its earlier projection of an October or November deadline, according to Bloomberg. (A key factor behind that date change: corporate tax revenues are down 9% this year.) And Treasury Secretary Steven Mnuchin reportedly has told congressional leaders that the debt ceiling may need to be raised by mid-September.

That September deadline could complicate efforts by Democrats to tie the debt ceiling to negotiations on a two-year spending caps deal. Either way, expect a September to remember.

The view from Wall Street: Analysts at Goldman Sachs remain sanguine about the risk of a fiscal crisis — though the outcome they anticipate might displease budget hawks. “None of the key fiscal deadlines have been addressed yet; nevertheless fiscal policy appears to pose less downside risk than seemed likely six months ago,” Goldman economists Alec Phillips and Blake Taylor wrote in a report to clients on Sunday. “Congressional Democrats and the White House appear to be close enough to an agreement on spending caps that the probability of substantial spending cuts looks low; we expect an agreement by October.”