What to Know in Washington: Crunch Week for Debt, Spending Deal

Congress and the White House are closing in on a debt ceiling and budget deal but with time running short could resort to a short term extension of U.S. borrowing authority before the House recesses this week.

Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin continued talks over the weekend by telephone. A key point under negotiation is the Trump administration’s initial demand for as much as $150 billion in long-term spending cuts to attach to the deal.

Mnuchin warned the U.S. risks missing debt payments in early September — before lawmakers are scheduled to return to Washington after a recess that begins for the House on Friday and the Senate a week later.

Both sides have offered assurances that Congress won’t let the U.S. run up against the debt limit and trigger a default, but lawmakers are still trying to include a budget agreement in the negotiation.

If the budget negotiations can’t be concluded in time, lawmakers may decide to pass a debt ceiling extension into October. That would avoid the risk of a default in the short-term but would extend uncertainty for markets.

Pelosi and Mnuchin have tentatively agreed on one part of the deal: to suspend the debt ceiling for about two and a half years, along with an increase in discretionary spending that’s estimated to cost $350 billion. Trump officials want to partially offset that spending increase for the military and domestic agency budgets with savings in entitlement programs like Medicare and Medicaid that are not subject to annual budget caps.

The White House late Thursday floated a menu of savings options worth $574 billion from which Pelosi could choose what to include in the deal. Pelosi resisted offsetting any of the spending increases, and any hope of a deal hinges on finding a compromise with the $150 billion that Trump officials want to save.

The White House offer also proposed extending caps on defense and non-defense discretionary spending for 2021 and 2022 to save another $516 billion.

After administration officials sent the offer to Pelosi, President Donald Trump on Friday said he thought the talks were in “good shape.” However he’d still have to sign off on the final terms of a deal and he hasn’t publicly set out what he wants on spending or on cuts.

While the budget deal doesn’t have to be included with a measure to raise the debt limit, lawmakers want it to be addressed soon so Congress can pass appropriations bills before the new fiscal year begins Oct. 1. Otherwise they’ll have to pass a stopgap spending measure to prevent a government shutdown.

If Congress doesn’t lift the budget caps that limit government outlays, current law would trigger automatic cuts at the end of the calendar year. Read more from Erik Wasson.

The U.S. Capitol Building

Reluctant Mueller Set to Face Democrats

With Trump’s impeachment as the prize that some Democrats covet — and others fear — Robert Mueller will finally sit down on Wednesday for five hours of questioning before two House committees.

The very reluctant witness won’t make it easy. So Democrats on the House Judiciary and Intelligence committees have been strategizing over how to draw out the former special counsel, who has said he has no intention of going beyond the findings in the 448-page report he completed in March.

“Many Americans, in their busy lives, have not had the opportunity to read the report. It’s a pretty dry, prosecutorial product. We want Bob Mueller to bring it to life,” House Intelligence Chairman Adam Schiff (D-Calif.) said yesterday on CBS’s “Face the Nation.”

To best showcase Mueller, Intelligence Committee Democrats have conducted mock hearings, with a staff member playing the taciturn former FBI director and lawmakers practicing how to press him for details in the few minutes each will get, while restraining the urge to grandstand. Read more from Billy House and Chris Strohm.

Trump Records Probe Halted: A U.S. judge put congressional Democrats’ efforts to probe Trump’s finances on hold after an appeals court rebuke. A federal appeals court in Washington said U.S. District Judge Emmet Sullivan abused his discretion when refused to allow the president to immediately appeal his ruling against Trump’s arguments that he can’t be sued under the Foreign Emoluments Clause — and that congressional Democrats lack standing to sue over it. The panel told Sullivan to reconsider. Read more from Bob Van Voris and Andrew Harris.

Politics & Elections

Trump and ‘Send Her Back’ Chants: At a political rally sometime in the coming weeks, Trump will almost certainly be met again with a chant rising from an auditorium packed with boisterous supporters: “Send her back!”

In that moment Trump will have to choose a course. He could turn to the crowd and deliver an unambiguous condemnation, telling his supporters that they shouldn’t persist with a slogan — directed at Somali-born Rep. Ilhan Omar (D-Minn.) — that many critics called racist. Or, Trump could pause, as he did during a rally in Greenville, N.C., last week, and let the chant build in volume, perhaps offering only a winking condemnation that frees his fans to make it the 2020 version of “Lock Her Up.”

It’ll be an early test of the president’s willingness to tolerate the more extreme elements of his base as he ramps up his bid for a second term. Last week, faced with bipartisan backlash, Trump first tried to distance himself from — then later signaled support for — a rallying cry that even some loyal backers said risked crossing the line into racism. Read more from Justin Sink.

Biden Leads but Faces Enthusiasm Gap: Joe Biden remains the top choice among Democratic voters in states that will hold early presidential primary and caucus contests in 2020, as four main contenders emerged as the top tier of the large field, a new CBS News poll showed yesterday. Biden had 25% support as voters’ first choice for the Democratic nominee, with Sens. Elizabeth Warren (D-Mass.) at 20% and Kamala Harris (D-Calif.) at 16% gaining ground on the former vice president. Sen. Bernie Sanders (I-Vt.) was fourth in the survey with 15% support. No other candidate reached double-digit support in the poll. Read more from Ros Krasny and Ben Brody.

Booker May Confront Biden on Race: Presidential Democratic candidate Sen. Cory Booker (D-N.J.) on Sunday suggested he could confront Biden on racial issues during the second round of debates next week. Booker said it would be “fair” to bring up the 1994 crime bill, which Biden supported in the Senate and has called the “Biden crime bill.” Booker said the measure put “mass incarceration on steroids” for African Americans. “Yeah, it is fair,” Booker said on CBS News’s “Face the Nation,” when asked by host Margaret Brennan whether he would be more aggressive on race at the forums i n Detroit on July 30-31. “I want people like Joe Biden, which he finally did, thank God, to stand up and say, ‘I was wrong, that bill did a lot of harm.’” Read more from Max Berley.

Collins’ Standing Erodes: Sen. Susan Collins (R-Maine) isn’t used to seeing her popularity under water in her home state, but that’s where she finds herself as she decides whether to run for a fifth term next year. Collins says she’s focused on preparing for a re-election bid but won’t decide until the early fall whether she’ll run. Her decision will shape the 2020 fight for the Senate, where she’s part of a shrinking group of lawmakers still eager to tout their record of bipartisan cooperation.

“The divisiveness of our country and the unceasing attacks by dark money groups in Maine have clearly had an impact,” Collins said in an interview at the Capitol. “But I believe that once Mainers really focus on the race and we remind them of my being the No. 1 most bipartisan member of the Senate, and all the accomplishments that I can point to that have directly benefited the state, I’ll be fine.” Read more from Steven T. Dennis.

Facebook Wins Big in 2020 Campaign: The Democratic National Committee’s debate-qualification rules are driving a social-media spending frenzy. But as the 2020 presidential campaigns spend millions to secure donors and push up polling numbers to win coveted debate slots, they’re also discovering that the economics of online advertising can be confusing — and punishing.

Between January 5 and July 13, some two dozen Democratic candidates collectively spent nearly $26 million on social-media ads, according to Bully Pulpit Interactive, an online communications agency. The biggest spenders so far have been Warren, at $2.9 million, and Sanders, at $2.6 million. But while most candidates say they have benefited from social media and relish its ability to target specific groups in desired locations, its costs often fluctuate wildly, making it difficult to control expe nses. Read more from Misyrlena Egkolfopoulou.

Puerto Rico Governor Won’t Run for Re-election: Puerto Rico Governor Ricardo Rossello won’t seek re-election and is resigning as president of his party, an attempt to quell calls for his immediate resignation after leaks of profane and sexist text messages from him and his inner circle sparked massive protests. “To every Puerto Rican man and woman: I have heard you and I’m listening now,” Rossello said in an address yesterday to the bankrupt and hurricane-ravaged U.S. commonwealth. “I’ve made mistakes, and I’ve apologized.”

The governor pledged to hold onto his office for now, in defiance of protesters’ demands he step down immediately after the scandal known as Ricky Leaks and the arrest of two former members of this administration on corruption charges. Demonstrations on the island have been growing, with the support of a cross-section of celebrities and political leaders. The next major protest is scheduled today. Read more from Michael Deibert and Jonathan Levin.

Movers & Shakeups

Four Officials Ejected at HHS: The HHS has suspended four officials and abruptly canceled acquisition services for the Defense Department and other agencies as part of an ongoing review, sources tell Bloomberg Law.

HHS Program Support Center Director Allen Sample and Financial Management Director William McCabe were walked out of the agency’s Bethesda, Md., office and placed on leave with pay in April. Two other career contracting officials—Head of Contracting Activity Patrick Joy and Supervisory Contract Specialist Donald Hadrick—were suspended under the same terms in June, the sources said. The moves came amid a review of the unit’s operations and retained earnings that started after Sample and McCabe we re suspended. Read more from Madison Alder and Chris Opfer.

National Taxpayer Advocate’s Advice to Successor: “Not a team player.” “A thorn in the government’s side.” “The voice of the taxpayer.” Outgoing National Taxpayer Advocate Nina E. Olson has been called many things, and she bears those titles—both the good and the bad—proudly.

Olson, who retires as head of the Taxpayer Advocate Service July 31 after 18 years, is no stranger to controversy. Her role — part of an independent arm of the Internal Revenue Service where taxpayers can turn for help if they have a dispute with the agency — has naturally pitted her against senior IRS leadership occasionally. But looking back at her time in the government, Olson says she wouldn’t change her approach. And Congress, which created the role to act as an independent voice for the American taxpayer, might have something to say about it if her successor feels otherwise. Read more from Allyson Versprille and Kelly Zegers.

Kagan, Kavanaugh, in High Court’s Center: As the Supreme Court wrapped up its first high court term with its strengthened conservative majority, Chief Justice John Roberts cast the deciding votes in two 5-4 cases, handing high-profile wins to both conservatives and liberals. But Roberts isn’t the only justice staking out a place in the court’s judicial middle.

Justice Elena Kagan has been in the majority of 6-3 decisions almost as often as Roberts during their years on the court, according to a Bloomberg Law analysis of the 116 rulings that broke 6-3 since the start of the 2005 term. And the court’s newest justice, Justice Brett Kavanaugh, showed signs of joining them. Read more from Kimberly Strawbridge Robinson.

Trump Officials Absent at Aspen: Call it the Case of the Vanishing Trump Administration Officials. That was the mystery that played out at the 2019 Aspen Security Forum, where senior officials, thought leaders and reporters gather annually in one of America’s wealthiest ski and sun playgrounds to debate timely matters of national security and foreign policy. The event was established a decade ago to bring Republicans and Democrats together for robust, bipartisan discussions. But this year’s gathering was marked chiefly by the absence of any of Trump’s top officials. They either had scheduling conflicts or opted to stay away from an event that became synonymous a year ago with the contortions top officials must perform in defending Trump’s more unpredictable policies. Read more from Nick Wadhams and Alyza Sebenius.

What Else to Know Today

Trump, Khan to Talk Taliban: Trump will push Pakistan’s prime minister, Imran Khan, to pressure the Taliban into signing a permanent ceasefire in Afghanistan, an administration official said. Trump will also demand that Pakistan’s government free Shakil Afridi, a physician imprisoned after helping the U.S. government locate and kill Osama bin Laden, the official said. The Trump administration will judge Pakistan in part on its treatment of Afridi, the official said. The president is scheduled to meet with Khan at the White House at noon today. Read more from Margaret Talev.

Iran to Execute Members of CIA Network: Iran has handed down death sentences to several nationals accused of being part of a CIA-trained spy network uncovered earlier this year. Seventeen people were arrested in all, and an unspecified number were recently sentenced to death, a senior intelligence official told foreign media in Tehran today. None of the suspects are dual nationals, according to the official, who declined to be identified. Read more from Golnar Motevalli.

Meanwhile, U.K. Prime Minister Theresa May will lead a meeting of her government’s emergency committee today to discuss the security of shipping in the Persian Gulf after Iran seized a British oil tanker in the Strait of Hormuz last week. May and the committee of top officials and ministers, dubbed Cobra, is to meet at 10:30 a.m. in London, her office said. The U.K. has demanded the immediate release of the Stena Impero and over the weekend summoned Iran’s charge d’affaires in London, Mohsen Omi dzamani, following the incident in one of the world’s critical energy chokepoints. Read more from Alex Morales, Alex Longley and Golnar Motevalli.

Trump Vouches Bail for Jailed Rapper A$AP Rocky: Trump said he received assurances from Swedish Prime Minister Stefan Lofven that detained American rapper A$AP Rocky would be “treated fairly” after promising to “personally vouch” for the bail of the hip-hop artist. The leader-to-leader phone call came after recording artist Kanye West lobbied Trump to help secure the release of the musician on Friday, after a Swedish judge ruled he would be detained until at least July 25. Trump said he and Lofven planned to speak about the case again soon. Read more from Justin Sink.

Journalist Behind U.K. Ambassador Leak: A teenage freelance reporter who worked on the story that revealed unflattering comments by Britain’s ambassador to the U.S. about Trump says his reporting wasn’t linked to any pro-Brexit plot. Steven Edginton, 19, wrote in the Daily Mail yesterday that his reporting on an internal cable to London from Washington ambassador Kim Darroch was part of a seven-month investigation into how the British civil service is preparing for Brexit, even though the teenager admits he also helps run social medi a accounts for the Brexit Party.

“I am sorry to disappoint the conspiracy theorists, but this was not a Brexiteer plot to topple Sir Kim, nor was it some devilish scheme to torpedo the independence of the Civil Service by installing a political appointee in Washington,” Edginton wrote. “Instead, it was simply an honest journalistic endeavor.” Read more from Gregory Viscusi.

To contact the reporter on this story: Zachary Sherwood in Washington at zsherwood@bgov.com

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