What to Know in Washington: Hurdles Remain to Debt Limit Solution

Speaker Nancy Pelosi said Congress should act this month to raise the debt ceiling, but it’s not clear that lawmakers and the White House will strike a deal before the House is set to leave town on July 26 for a six-week recess.

Congressional leaders have increasingly acknowledged that waiting until September to allow the U.S. to borrow more money would raise the prospects of a payment default if new unofficial estimates are correct.

Republicans, Democrats and Trump administration officials have intensified their negotiations this week, and all sides say a deal will get done. The Treasury Department hasn’t provided lawmakers with an updated official estimate for how much time they have to act before a default. Lawmakers are not scheduled to be back in Washington until Sept. 9.

After speaking with Treasury Secretary Steven Mnuchin yesterday, Pelosi told reporters she’s now “convinced” that Congress should raise the U.S. debt ceiling this month. They spoke twice yesterday and agreed to speak again today, according to Pelosi’s office.

The Treasury has been using accounting measures to avoid a payments default since the borrowing limit snapped back into place on March 2. The department’s room to maneuver depends on tax revenue, and the Bipartisan Policy Center, an independent think tank, this week adjusted its estimate to say there is a “significant risk” of defaulting on a key payment in early September.

Lawmakers this week asked Mnuchin to provide a new official estimate backing up the independent analysis.

Photographer: Win McNamee/Getty Images
Pelosi at a press conference on Thursday.

Whether a debt limit deal will be part of a broader budget negotiation is unclear.

House Democrats have been trying to leverage the debt ceiling bill to increase federal spending caps, and they were looking to negotiate those caps after their August recess.

That budget deal, which would cover two fiscal years, aims to avoid an automatic $126 billion cut at the end of the calendar year and — if Democrats prevail — add additional domestic spending above fiscal 2019 levels. Such an agreement would help the government avoid another shutdown when funding runs out Oct. 1.

Democrats and Republicans are also talking openly of a short term debt ceiling increase this month while budget talks continue. Read more from Erik Wasson.

Under Lawmakers’ Scrutiny

Tensions Rise Over Who Questions Mueller: Simmering political tensions over next Wednesday’s high-stakes testimony by former Special Counsel Robert Mueller have only escalated with the realization that little more than half the 41 members on the House Judiciary Committee will get to question the star witness on live TV. With two hours allotted for testimony by the reluctant witness, each party will get an hour for questioning under a schedule released yesterday.

Chairman Jerrold Nadler (D-N.Y.) anticipates 22 members will get five minutes each to pose questions starting at 9 a.m. But ranking member Doug Collins (R-Ga.) said the committee “got rolled,” adding that “our members need to be able to talk to Robert Mueller, if he actually is going to come.” Read more from Billy House.

Acosta’s Handling of Epstein Case: Nadler also said yesterday he’s sending a letter to the Justice Department requesting a briefing and documents related to Labor Secretary Alex Acosta’s handing of the sex crimes prosecution of Jeffrey Epstein, according to a person familiar with Nadler’s plans. Earlier in the week, Nadler had told reporters he would have to weigh carefully whether to open a probe, given what he said was a crunch of other issues still pending, Billy House reports.

Conservative Group Should ID Donors, Democrats Say: More than two dozen Senate Democrats are calling on an activist nonprofit that backs conservative judicial nominees to disclose its funding sources, questioning its transparency and connections to donors who they say have spent millions on advertising. Senate Minority Leader Chuck Schumer (D-N.Y.) and Senate Judiciary Committee member Sheldon Whitehouse (D-R.I.) said the Judicial Crisis Network is a “dark money group.” Read more from Jake Holland.

• Meanwhile, another group of Senate Democrats is asking why the IRS criminal investigation division wasn’t consulted on the agency’s decision to eliminate donor disclosure requirements for tax-exempt organizations that may be involved in political activity. Read more from Kelly Zegers.

Getting Trump’s N.Y. State Tax Returns: Lawyers for House Democrats are looking at a New York law that would give them a route to access Trump’s state tax returns. “The House counsel is reviewing all of that right now,” House Ways and Means Chairman Richard Neal (D-Mass.) said yesterday. “They still have some legitimate concerns about it. That comes from House counsel, not me.” Read more from Laura Davison.

Subpoenas for Trump’s Deutsche Bank Records: Two House committees are defending subpoenas to Deutsche Bank and Capital One for Trump’s personal financial records. The House Financial Services and Intelligence committees urged the federal appeals court in New York to reject Trump’s attempt to block the subpoenas, arguing that Congress has broad authority to investigate and that demands for Trump’s records are proper. Read more from Bob Van Voris.

Brown Attacks Trump Capital Gains Cut: Senate Banking Committee ranking member Sherrod Brown (D-Ohio) is pushing back against the Trump administration’s plans to cut taxes by indexing capital gains to inflation, a move that he says would only help the wealthy and be illegal. “We urge you to reject reported plans to use questionable authority to — yet again — lavish tax cuts upon our country’s wealthiest, while middle class families and working people continue to see costs rise and wages stagnate,” Brown wrote to Mnuchin in a letter dated Thursday. Nearly a dozen Democratic senators s igned it. The letter cited data from the Penn Wharton Budget Model, which showed that a reduction in capital gains tax would amount to a $102 billion tax cut, 86 percent of which would flow to the top 1 percent of taxpayers.

The White House is developing a plan to cut taxes by indexing capital gains to inflation, Bloomberg News reported last month. The move may be done in a way that bypasses Congress. Read more from Saleha Mohsin.

Also Happening On The Hill

Chamber Urges House to Oppose $15 Wage Bill: A week before the House is set to vote on a $15-per-hour minimum wage bill, the world’s largest business organization is urging lawmakers to oppose it. “While the U.S. Chamber of Commerce is willing to work with members of Congress to develop a legislative package that includes an increase guided by economic conditions, $15 per hour is not that number, and the Raise the Wage Act is not that legislation,” the Chamber said in a letter sent to members of the House yesterday. Read more from Jaclyn Diaz.

Rubio Seeks Delay of Pentagon Cloud Bid: Sen. Marco Rubio (R-Fla.) is calling for the Defense Department to delay awarding its $10 billion cloud contract to ensure “a fair and open” contest. Rubio wrote a letter to National Security Adviser John Bolton asking him to direct the Pentagon to hold off on choosing a winner for the controversial project. In his letter, dated yesterday, Rubio said the project, known as the Joint Enterprise Defense Infrastructure cloud, “suffers from a lack of competition” and “will result in wasted taxpayer dollars.” Read more from Naomi Nix.

What Else to Know Today

Trump Surrender May Not End Census Battle: Trump’s surrender in his fight to put a citizenship question on the 2020 census may not be the end of the legal war. One of the groups that mounted a successful challenge to the question plans to continue pursuing its claim that two government witnesses testified falsely in a trial. The New York Immigration Coalition plans to file a motion Friday seeking court sanctions against the government, according to Sarah Brannon, a lawyer with the American Civil Liberties Union who represents the group. Read more from Bob Van Voris.

Trump’s Social Media Summit: Trump said yesterday that he’d summon social media firms for a meeting at the White House to discuss conservative grievances about alleged political bias on their platforms, and that he directed his administration to explore methods to protect online speech.

“We will ask representatives of the major social media platforms to join me at the White House over the next month,” Trump told his audience at an event the White House billed as a “social media summit.” Trump added he’d direct the administration to “explore all regulatory and legislative solutions to protect free speech and the free speech rights of all Americans.” Read more from Ben Brody.

Trump Warns Facebook Over Crypto Plan: Trump last night warned Facebook over its plan to create a digital currency, a move that poses a new obstacle to the company’s cryptocurrency ambitions. “Facebook Libra’s ‘virtual currency’ will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks,” Trump said in a series of posts on Twitter.

In the tweets, the president also expressed skepticism of digital currencies in general. “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” Trump wrote. “Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.” Read more from John Harney and Ben Bain.

• Federal Reserve Chairman Jerome Powell said he’s unsure how regulators would handle Facebook’s plan for Libra. He made that clear at a Senate hearing yesterday where he reiterated his concerns about the cryptocurrency’s potential for fomenting money laundering and financial instability problems. And he expressed specific worries over customers’ privacy. Read more from Jesse Hamilton.

Trump’s Top SCOTUS Lawyers Post Winning Term: The federal government’s top lawyers at the U.S. Supreme Court posted a better record than last term in cases in which it was a party—but it still barely passed the 50-50 mark. It’s part of a decades-long slide, which may be explained by the emergence of a group of Supreme Court specialists to counter the government’s legal team.

Last term, the office of Trump’s Solicitor General Noel Francisco lost 12 cases and won just 11 such cases. This term the SG’s office had 12 victories and 10 defeats. That’s in stark contrast to its 22 and 6 record when participating as a friend-of-the-court, where the government takes a position in a dispute despite not being a party. Read more from Kimberly Strawbridge Robinson.

White House Wary of Fannie-Freddie Fix: The Trump administration is growing wary of taking bold steps toward freeing Fannie Mae and Freddie Mac from federal control before the 2020 election, said people familiar with the matter, in part because of the political risk of potentially upending the U.S. mortgage market. While White House and Treasury Department officials are eager to end the companies’ decade long conservatorships, they see the task as arduous, slow-moving and extremely complicated, said the people who asked not to be named in discussing internal deliberations. Read more from Saleha Mohsin, Jennifer Jacobs and Austin Weinstein.

U.S. Weighing Iran Sanctions ‘Snapback’: Iran’s decision to ramp up uranium enrichment is prompting debate over whether the U.S. should — or even can — invoke a threat that negotiators built into the 2015 nuclear agreement but hoped would never be used: a “snapback” of international sanctions. Although Trump withdrew from the accord last year, the administration is being pressured by some American hard-liners to invoke a mechanism that ultimately would trigger a return to United Nations Security Council sanctions beyond those the U.S. is already imposing unilaterally.

Such a move, if successful, would shred what’s left of European-led efforts to keep the multinational accord alive, and analysts and diplomats say it would be galling coming from the nation that was first to quit the deal. Read more from David Wainer and Daniel Flatley.

U.S.-China Trade: When it comes to Chinese purchases of U.S. agricultural goods, signs are growing that Trump won’t get what he wants anytime soon. Trump complained yesterday that China hasn’t boosted its purchases of U.S. farm products, a promise he claims he secured in a meeting with his counterpart Xi Jinping in June. But according to officials in Beijing familiar with the talks, no such agreement was made. China’s Commerce Ministry yesterday also indicated that in their view, substantial discussions have yet to restart even though both sides spoke on the phone. Read more.

Loan Access for Disadvantaged Farmers: More information on how much and what types of agricultural loans socially disadvantaged farmers get is needed, the Government Accountability Office found, Teaganne Finn reports. Farmers and ranchers of a certain racial or ethnic minority group and women are considered “socially disadvantaged” by the Agriculture Department. Rules that “generally prohibit lenders from collecting data on the personal characteristics of applicants for loans” make information about socially disadvantaged farmers and ranchers unavailable, said the report.

A Consumer Financial Protection Bureau rulemaking requires collection of such data, however the bureau delayed the rulemaking in 2018 due to “stated resource constraints and other priorities,” said GAO. The bureau plans to resume work on the rule later this year. USDA’s annual surveys between 2015 and 2017 showed that an average of 17% of primary producers were socially disadvantaged and accounted for 8% of outstanding total agricultural debt.

Border Crossing Audits: Land border crossings need a better auditing plan to help ensure their infrastructure budget requests are keeping up with the rising number of travelers and cargo crossing, a report from the GAO found. The GAO said Customs and Border Protection and the General Services Administration, which own or lease the nation’s 167 land border entry points, should develop a strategy to ensure they assesses the conditions of the ports, some of which lag in their inspection capacity and use of tech for screen ing, Michaela Ross reports.

Nike Moves Ahead After Flag Flap: Nike is proceeding with a new factory in Arizona after a flap with Gov. Doug Ducey (R) led to speculation that the project was up in the air. The athletic-apparel company announced the plans yesterday, saying the new plant — located outside of Phoenix in the suburb of Goodyear — will generate more than 500 full-time jobs and an investment of at least $184 million. The Arizona Commerce Authority also shared the decision in a tweet.

Plans for the factory were put in doubt after Ducey moved to rescind up to $1 million in incentives offered to the company. He criticized Nike’s decision to recall shoes with a Revolutionary War-era flag called the Betsy Ross. Read more from Randall Williams.

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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