White House proposal and the Mulvaney factor loom debt ceiling fight

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Yet the hard part — finalizing off-sets for at least a portion of the spending increases that would be agreed upon — is just that: hard. And it was made more complicated to some degree Thursday night when the White House sent over its proposed list of options to pay for the increases.

Bottom line: A deal is very much within reach, with various players at points over the past 24 hours predicting a final agreement by Friday. But the new entrance of the official list of White House options roiled negotiators on both sides.

What to watch Friday: The House and Senate are out of session. Lawmakers are out of town for the most part. Staff is very much still in and working. We’re at the “wait for white smoke” part of the process.

The deadline: Speaker Nancy Pelosi has made clear for much of the week the House needs an agreement locked in by the end of this week in order for the chamber to move it before they leave for August recess next week. There’s some skepticism at this point that unofficial deadline won’t be reached Friday, but it remains the goal.

The administration: The White House sent a menu of approximately $575 billion in spending cut options up to Pelosi as their preferred pathway to lock in an agreement, according to multiple people involved.

From the Capitol Hill side, the discussions over off-sets — and the very specific, detailed staff work on crafting them — has been ongoing for days. The White House options were an interesting late arrival to talks.

The Hill reaction to the White House options

From a Democratic source involved in the talks: “This is the White House’s starting point for negotiations on this aspect. They understand these levels are nonstarters for us. Talks will continue.”

From a congressional GOP source: “It’s a messaging document.”

While many of the White House options track closely with conservative spending cut and reform priorities, the sources said, one is raising eyebrows on both sides of the aisle: the inclusion of the White House drug pricing overhaul proposal. This proposal was estimated to save $115 billion in the administration’s budget.

The drug pricing effort has stalled out, at least for the moment, on Capitol Hill, and taking a run at using the debt ceiling and budget talks as a vehicle for it — particularly given Senate GOP objections to pieces of that plan — is a very interesting play.

Numbers reality

The White House continues to talk about how they are looking for $150 billion in cuts or off-sets in order to lock in a final agreement.

That’s a big number — one that is not acceptable to Democrats, people close to the talks say. But there are also ways to achieve off-sets that aren’t painful cuts. For example, there are easy ways to lock in roughly $50 to $60 billion of that through things like extending mandatory sequestration.

In reality the current talks have been about identifying — and agreeing on — somewhere between $40-$60 billion in off-sets. This isn’t easy — both sides are protective of their priorities and years of these deals have eliminated or significantly limited some of the lowest hanging (or gimmicky) pay-fors. But at the same time the staffers on both sides working on these have done this repeatedly over the years, have their own menus of options and have been becoming specialists of sorts in threading the needle on these things. Left to their own devices, they will inevitably find a way. The big question now is if they’ll be left to their own devices.

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The mood: Before the White House proposal was sent up last night, lawmakers were making pretty clear how close they were. Take Senate Appropriations Chairman Richard Shelby — the Alabama Republican whose staff was crafting many of the off-set proposals. This is what he told CNN’s Morgan Rimmer:

“I think we’re closer than we’ve ever been, and I hope we will close the deal. We need to do it.”

Senate Democratic Leader Chuck Schumer echoed that sentiment:

“We’re close,” Schumer told CNN’s Ted Barrett. “There is a desire to come to an agreement from all of us.”

And yet, Schumer also hit on the key worry that has been looming over the talks since they kicked into high gear last week: White House acting chief of staff Mick Mulvaney.

“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,” Schumer said. “I hope he will let Mnuchin and us come to the agreement and I think we can get it quite soon.”

Schumer is, of course, talking about what some on the Hill refer to as the “Mulvaney factor.” The White House spending cut and reform options sent to Democrats last night very much represent the Mulvaney (and acting OMB Director Russ Vought) perspective on the talks. Who is speaking for the White House — and who is speaking to the President — has presented an ongoing dynamic that is still part mystery, part fascination, part terrifying for the lawmakers and staff working on these negotiations.

For the moment, most everyone says publicly they trust that Treasury Secretary Steve Mnuchin, who has had more than a dozen calls with Pelosi over the last 10 days, even while he’s been in France for the G-7 finance ministers meetings, and has served as the point person on the talks, speaks for the White House. (Pelosi told CNN bluntly: “Yes,” when asked if she trusted he did Thursday.)

But in a comment that really gives a window into how complicated this has all been, one lawmaker involved in the talks said this: “It will be good to get Mnuchin back into the country.”

A way too premature, but still important, look ahead

If — and we’re still at the if stage — the House is likely to go first, where Democrats should be able to pass any agreement on their own.

But it will be very interesting to see how House Republicans vote on any agreement that is reached. Keep in mind, House GOP Leader Kevin McCarthy has been with Senate Majority Leader Mitch McConnell almost every step of the way in urging the President to support an agreement. There will certainly be a group of conservatives who oppose the spending increases from the get go, but there is always a concern that should a large portion of the House GOP revolt — and revolt vocally — against the deal, it could have an effect on President Donald Trump’s willingness to sign it.

Again — this is a very cart before the horse type of view of things. But it’s something people are discussing as they game out how this will all be processed if an agreement is reached.

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