What to Know in Washington: A Spending Standoff as Talks Stall

Republican leaders balked at Democratic requests for spending on non-defense programs, warning that both parties are still far apart on a deal to prevent a government shutdown and raise the debt ceiling.

The request came at a meeting yesterday among congressional leaders Mitch McConnell (R-Ky.), Chuck Schumer (D-N.Y.), Nancy Pelosi (D-Calif.), and Kevin McCarthy (R-Calif.), and White House officials such as Treasury Secretary Steven Mnuchin, acting White House Chief of Staff Mick Mulvaney and acting White House budget chief Russ Vought.

Republicans demanded more defense funds that Democrats want to match with other federal programs. Such a deal would lift budget limits, which under current law would spark a $126 billion automatic budget cut at the end of 2019.

“We are further apart because the Democrats are asking for more money than they asked for last time,” said McCarthy, the House minority leader, after the meeting. “They just want to spend more.”

The top Democrat on the Senate Appropriations Committee, Patrick Leahy (D-Vt.), confirmed that Democrats made an offer but wouldn’t say how much they proposed for non-defense discretionary spending. Mulvaney said Democrats are asking to spend $647 billion on government programs in fiscal year 2020, compared to the $639 billion they previously requested.

“You tell me if things are moving in the right direction,” Mulvaney said after detailing Democrats’ offer, implying that the meeting didn’t go well.

Schumer said Republicans were mischaracterizing the offer from Democrats. He and Pelosi said in a joint statement that lawmakers working together “can get the job done.”

“While we did not reach an agreement, today’s conversation advanced our bipartisan discussions,” they said. “If the House and Senate could work their will without interference from the president, we could come to a good agreement much more quickly.”

Mnuchin said the White House offered a one-year extension of current levels of government spending and a one-year suspension of the debt limit. He said everyone agreed they will raise the debt ceiling but there is still disagreement about the budget caps.

With just over three months left until the Sept. 30 end of the current fiscal year, the annual budget process has once again gotten off to a slow start. Without new spending bills or a stopgap measure, the government would shut down Oct. 1. Read more from Erik Wasson and Jack Fitzpatrick.

Photographer: Andrew Harrer/Bloomberg
McConnell at the Capitol on Wednesday.

No Deficit Fears on Campaign Trail: Meanwhile, Democratic presidential candidates are replacing their post-Bill Clinton rhetoric of fiscal restraint with a new argument that money is no obstacle to addressing domestic issues like rising inequality and poverty — and they promise to pay for it by taxing the rich, cutting military spending, or borrowing.

There’s Bernie Sanders with Medicare for All, and a promise of an economic bill of rights that also guarantees housing, a job and a living wage. Elizabeth Warren proposes having the federal government eliminate vast amounts of student debt as well as pay for universal child care. Even former Vice President Joe Biden, the most moderate of the major contenders, says there’s plenty of money to pay for Democratic priorities.

The sharp change in attitude is propelled by Democrats’ irritation that Republicans have grown the deficit despite years of presenting themselves as the belt-tightening party as well as voter pressure to tackle priorities like health and child care. Read more from Sahil Kapur.

Also Happening on the Hill

Blocking Saudi Arms Sales in a Trump Rebuke: The Senate will vote today on resolutions to halt arms sales to Saudi Arabia and other countries in the Middle East under an agreement between McConnell and Bob Menendez (D-N.J.) the top Democrat on the Foreign Relations Committee. Menendez unveiled the deal on the Senate floor yesterday. Four Republicans are co-sponsoring the 22 measures, which would provide enough votes to pass them, if all Democrats agree. Read more from Daniel Flatley.

Move to Limit Emergency Power Hits Snag: Lawmakers say they are worried about the president’s authority to unilaterally declare national emergencies, as an attempt to do something about it was nonetheless put on pause at a Senate committee meeting yesterday. The measure to limit presidential emergency authority spurred by President Donald Trump’s moves to redirect billions of dollars to build a wall and threaten tariffs upon Mexico, was pulled from consideration by the Homeland Security Committee, even though it has bipartisan backing, panel members said. Read more from Michaela Ross.

Grassley Against Trump Drug Plan: Senate Finance Chairman Chuck Grassley (R-Iowa) came out against one of the administration’s main drug-price proposals, raising the specter Republican opposition could kill the idea. Grassley told reporters yesterday he opposes a White House plan to tie drug prices in the U.S. to their corresponding prices overseas. “I’m gaining a view that I don’t think that this administration’s approach on international pricing is going to be to the benefit of the adoption and research for modern drugs,” he said. Alex Ruoff and Jacquie Lee have more.

Slavery Reparation Bill May Get Vote: A bill that would launch a commission to consider proposals for reparations for slavery is one step closer to a vote on the House floor. “It’s long overdue,” Rep. Sheila Jackson Lee (D-Texas) said at a House Judiciary subcommittee hearing yesterday. “It is deserving. And it is the right thing to do.”

Jackson Lee and over 60 other members are sponsoring a measure to form a panel to study a potential national apology for slavery and race discrimination in the U.S. House Majority Leader Steny Hoyer (D-Md.) said he expects a Judiciary Committee markup. The bill faces a steep hurdle in the Republican-led Senate, however. Majority Leader McConnell said Americans today shouldn’t be liable for actions of the past. Read more from Elizabeth Elkin.

Democrats Probe Auto Rules Lobby: House Energy and Commerce members are starting a probe into an oil industry lobbying campaign pushing the Trump administration to ease vehicle fuel economy standards. Committee Democrats sent letters to Marathon Petroleum, Americans for Prosperity, American Fuel and Petrochemical Manufacturers, and others for information on what they say is a “covert lobbying and social media campaign” to support White House changes. Read more from Jennifer A. Dlouhy and Ryan Beene.

Meanwhile, the United Auto Workers union’s top official in Washington is prepared to tell Congress at a House hearing today that freezing higher fuel efficiency requirements after 2020 “could lead to protracted litigation and uncertainty in the industry that will limit growth” and call for federal regulators, California officials and the industry to reach a workable consensus. Read more from Ryan Beene.

Female-Genital Mutilation Case: The Justice Department says a new Supreme Court decision should be interpreted to bar the House of Representatives from trying on its own to reinstate a female-genital mutilation case that the government abandoned. Federal prosecutors told a federal appeals court that this week’s Supreme Court decision barring the Virginia House of Delegates from appealing a state legislative redistricting decision “forecloses’’ the U.S. House’s argument to intervene in the criminal case.

The Justice Department abandoned prosecution of a Michigan doctor on charges of mutilating genitals of girls as young as age 6. It says it won’t appeal trial judge’s finding that law failed to state congressional authority to outlaw female genital mutilation. Read more from James Rowley.

Movers & Shakeups

Trump Believes He Has the Authority to Replace Powell: Trump has told confidants as recently as yesterday that he believes he has the authority to replace Jerome Powell as chairman of the Federal Reserve Board, according to people familiar with the matter. In Trump’s line of thinking, he could demote Powell to be a board governor, but isn’t planning to do so right now, the people added.

Their account of the president’s conversations emerged just hours after Powell said he intends to serve his full four-year term despite Trump’s continuing criticism of Fed policy. Earlier this year, Trump asked White House lawyers to explore options for removing him, Bloomberg reported on Tuesday.

The people, who requested anonymity to discuss internal White House deliberations, said that Trump’s frustration with Mnuchin is limited to his recommendation to pick Powell as Fed chair. Mnuchin is otherwise in good standing with the president, they said. Read more from Jennifer Jacobs and Saleha Mohsin.

Trump Pick Kacsmaryk Confirmed: Matthew Kacsmaryk won confirmation for a U.S. judgeship yesterday in spite of opposition from 75 advocacy organizations representing LGBT interests. The Senate confirmed the appointee 52 to 46 for a lifetime spot on the U.S. District Court for the Northern District of Texas. Groups representing LGBT rights have questioned Kacsmaryk’s ability to be impartial on cases involving gay and transgender people.

Trump has vowed to reshape the federal judiciary with conservative appointees and Senate Republicans have obliged by confirming nearly all of his nominations. In Kacsmaryk, Trump pitched a conservative lawyer who implied in a regulatory matter that transgender people are delusional. Jake Holland has more.

Elections & Politics

McDonald’s Picket Line is New Campaign Stop: Flanked by dozens of striking fast-food workers, Sen. Kamala Harris (D-Calif.) stood behind a large pro-union banner in Las Vegas, chanting, “McDonald’s pay is really low.” The next day, on Saturday, three other Democratic presidential candidates joined a protest against the restaurant chain in Charleston, S.C. Former Rep. Beto O’Rourke joined a group of striking workers before they marched, while Sen. Cory Booker (D-N.J.) and Mayor Pete Buttigieg spoke to the strikers afterward.

Protests for a $15 minimum wage have become a regular campaign stop for Democrats running for president as they court unions and workers — and the place they regularly choose to protest, outside McDonald’s restaurants, puts the country’s second-largest private employer in an uncomfortable spotlight. Read more from Tyler Pager.

Biden Refuses to Apologize for Comments: Biden yesterday refused to apologize for comments about his dealings with two segregationist senators in the 1970s, and said that Booker and other critics among his Democratic rivals were being disingenuous. “Apologize for what? Cory should apologize. He knows better,” Biden said at a Maryland fundraiser. “There’s not a racist bone in my body, I’ve been involved in civil rights my whole career. Period. Period. Period.”

Biden was responding to criticism from Booker, who had demanded that he ask forgiveness for saying that he was able to work with segregationists in an atmosphere of “civility” in the U.S. Senate more than four decades ago. Read more from Jennifer Epstein and Tyler Pager.

RNC Fundraising: The Republican National Committee announced it raised $14.6 million in May, a record total for the month in a non-presidential election year, and ended the period with $37 million in the bank. The committee said it also spent $12.3 million last month, and its cumulative spending of $62.9 million so far in 2019 is the largest outlay by the party for the first five months of any year — including those with presidential elections. Read more from Bill Allison.

Trump Blamed for Negative Discourse: A large majority of Americans feel the nation’s political discourse has become more negative, as well as less respectful, fact-based and substantive—and they see Trump as a major reason. A new Pew Research Center surveyreleased yesterday showed over half of its respondents said Trump has changed both the tone and nature of political discussion for the worse, while only 24% said he’s changed it for the better. Half said talking about politics with people they disagree with is “stressful and frustrating.” Republicans said that members of their party are less comfortable than Democrats in “freely and fairly” expressing their views. Read more from Misyrlena Egkolfopoulou.

What Else to Know

Trump, Trudeau to Meet: Canadian Prime Minister Justin Trudeau plans to take up trade disputes with Trump in Washington today and meet with congressional leaders on the proposed U.S.-Canada-Mexico trade pact. Trudeau is set to talk with Trump and U.S. cabinet officials at the White House before meeting with Speaker Pelosi and Majority Leader McConnell, as lawmakers weigh ratification of the three-country trade deal.

The prime minister will make the case against potential U.S. tariffs or quotas on uranium, a nuclear power plant fuel produced in his country, and American tariffs on softwood lumber, a dispute that predates the administrations of both countries, two Canadian officials said, speaking on condition of anonymity. Read more from Josh Wingrove.

Mexican Senate Ratifies New NAFTA Accord: Mexico’s Senate ratified a North American trade deal with the U.S. and Canada, becoming the first to do so amid a truce reached with Trump over an unrelated tariffs threat. The vote took place during a special session less than a month after President Andres Manuel Lopez Obrador sent the accord to the Senate. The U.S.-Mexico-Canada agreement was signed by leaders of the three countries in November and now awaits legislative votes. Read more from Nacha Cattan.

Tech Firms Join Forces to Oppose Trump Tariffs: Dell, HP, Intel, and Microsoft are joining forces to oppose Trump’s proposed tariffs on laptop computers and tablets among $300 billion in Chinese goods targeted for tariffs. The companies submitted joint remarks opposing the tariff escalation, saying tariffs would hurt consumer products and industry and fail to address China’s trade practices. The tariffs are poised to hit during the peak holiday and back-to-school sales period, they said. Read more from Mark Niquette.

U.S. CEOs Meet With China’s Premier: A group of chief executive officers of American corporations are in Beijing this week to meet with China’s Premier Li Keqiang, as the simmering trade war ensnares companies from both countries. The heads of Dow, UPS, Pfizer, Hyatt Hotels, Prologis and Honeywell, met with Li at Beijing’s Great Hall of the People — home to the nation’s legislature — today, according to a statement released by the Chinese government. Also at the meeting were 13 other global business leaders, including the heads o f Volkswagen, Australian miner BHP Group, and Nokia.

The visit comes as the geopolitical tensions between the two powers enter a new phase. Since trade talks broke off in May, Trump has ordered additional tariffs on Chinese goods, blocked local champion Huawei Technologies, and threatened to widen a ban to Chinese video-surveillance companies. Meanwhile, Beijing has clamped down on American corporations from Ford to FedEx and said it will create a blacklist of foreign firms that damage their Chinese counterparts. Read more.

Iran Shoots U.S. Drone: Iran said it shot down a U.S. drone near the mouth of the Persian Gulf, escalating already fierce tensions in an oil-exporting region that’s been on the brink of a military confrontation for weeks. “We will defend Iran’s airspace and maritime boundaries with all our might,” Ali Shamkhani, secretary-general for the Supreme National Security Council was quoted as saying by state-run Islamic Students’ News Agency. “It doesn’t matter which country’s aircraft cross our airspace.”

Iranian media described it as a spy drone and said it was in Iranian airspace and was hit near Kuh Mobarak, on Iran’s southern coast. The aircraft flew only in international airspace, U.S. Central Command spokesman Lieutenant Colonel Earl Brown said by phone today. Read more from Arsalan Shahla, Zainab Fattah and Margaret Talev.

North Korean Missiles: North Korea has made minimal advances in the capabilities needed for an effective nuclear missile that could reach the American mainland, according to the U.S.’s No. 2 military official. “Probably the only thing they’ve advanced is their understanding of mixing and fabrication of solid-rocket fuel” after tests of short-range systems in May, General Paul Selva, vice chairman of the Joint Chiefs of Staff, said in an interview. Solid fuel is more stable than liquid fuel and allows for faster reloading of mobile missiles. Read more from Tony Capaccio.

Trump Awards Medal to Laffer: History hasn’t exactly put the “Laffer Curve” on a pedestal but Trump nonetheless bestowed the country’s highest civilian honor on its namesake yesterday, the inspiration behind decades of GOP proposals to cut taxes. Trump awarded the Medal of Freedom to economist Arthur Laffer, an economic adviser to Trump’s 2016 campaign and a co-author of Trumponomics: Inside the America First Plan to Revive Our Economy. Read more from Margaret Talev and Justin Sink.

To contact the reporters on this story: Zachary Sherwood in Washington at zsherwood@bgov.com; Brandon Lee in Washington at blee@bgov.com

To contact the editors responsible for this story: Giuseppe Macri at gmacri@bgov.com; Loren Duggan at lduggan@bgov.com

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