Potential budget deal faces one last hurdle

Potential budget deal faces one last hurdle
© Aaron Schwartz

White House and congressional negotiators have essentially agreed on top-line spending numbers for a two-year budget deal, but a dispute persists over how to offset the increases for defense and non-defense programs, sources familiar with the talks say.

The prospective two-year spending deal would also raise the debt limit beyond the 2020 election.

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An official familiar with the talks said the amount agreed to for defense programs exceeds $735 billion, a figure that Senate Republicans were expecting earlier in the week would be the discretionary defense spending limit.

The cap on non-defense spending programs would be increased by a similar percentage. The current budget caps for fiscal year 2019 are set at $647 billion for defense and $597 billion for non-defense programs.

When the Overseas Contingency Operations (OCO) and other off-book funds are factored in, the overall spending levels for 2019 are $716 billion for defense and $620 billion for non-defense.

The biggest obstacle to clinching a deal is a disagreement over how much of the spending increase to offset to minimize the impact on the federal deficit.

Another disagreement is how to account for a $22 billion program to help veterans, the VA Mission Act. Speaker Nancy PelosiNancy PelosiWhy President Trump needs to speak out on Hong Kong Anti-Trump vets join Steyer group in pressing Democrats to impeach Trump Pelosi warns Mnuchin to stop 'illegal' .3B cut to foreign aid MORE (D-Calif.) does not want the cost of that program to count against the spending cap for non-defense domestic programs.

In a letter to Treasury Secretary Steven MnuchinSteven Terner MnuchinPelosi warns Mnuchin to stop 'illegal' .3B cut to foreign aid Trump phoned bank CEOs as stock market plunged Wednesday: report The Hill's Morning Report — Trump and the new Israel-'squad' controversy MORE Sunday, Pelosi wrote that “past agreements on parity between defense and nondefense spending did not take into account the additional and growing cost of implementing the VA MISSION Act’s program.”

A Republican senator, however, said GOP leaders want the VA Mission Act to be kept within the budget caps so as not to create a new “entitlement.”

A person familiar with the talks said there’s a path to resolving the VA Mission Act and isn’t at the center of the talks.

The White House also wants a pledge from Pelosi not to add any policy riders to the year-end spending package that results from a budget deal.

Pelosi spoke with Mnuchin, the lead White House negotiator, by phone Wednesday morning and said afterward that she hopes to get a deal by week’s end.

Mnuchin was in Chantilly, France, attending a meeting of Group of Seven (G-7) ministers.

“So we have to get something soon, so that we can post it with enough lead time,” Pelosi told several reporters. “Preferably by the end of the week.”

She cautioned that “we’re not finished” but suggested the talks are close to wrapping up.

"The conversations are all about seeking clarity, and if that's called progress, then yes we did [make progress]," Pelosi said.

Sen. David Perdue (R-Ga.), one of Trump’s closest allies in the Senate, said Wednesday there’s basic agreement on the top-line numbers and that a deal is “very close.”

Perdue, who received a briefing on the talks, said from “what I hear in the last hour or two, they’re very close on the numbers.”

Perdue also said the question of offsets is the main outstanding issue.

Mike Lillis contributed to this report, which was updated on July 18 at 7:58 a.m.