What to Know in Washington: Trump, Congress Clinch Budget Deal

President Donald Trump announced a bipartisan deal to suspend the U.S. debt ceiling and boost spending levels for two years, capping weeks of frenzied negotiations that avert the risk of a damaging payments default.

Congressional leaders pledged to support the bipartisan compromise that left all sides unsatisfied but focused on the provisions they could count as a win.

“I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelosi, and House Minority Leader Kevin McCarthy – on a two-year Budget and Debt Ceiling, with no poison pills,” Trump said on Twitter. “This was a real compromise in order to give another big victory to our Great Military and Vets!”

House leaders plan to approve the agreement this week before members leave on Friday for a six-week recess. The Senate can put it to a vote as late as next week. The White House, in a statement last night, said “both House and the Senate should quickly move this deal to the president’s desk for signature.”

The measure, finalized after weeks of negotiations between Pelosi and Treasury Secretary Steven Mnuchin, would suspend the debt ceiling until July 31, 2021, eliminating the risk that the government could miss payments as early as September. It would also cancel automatic cuts that would have reduced domestic spending by $55 billion and military spending by $71 billion compared with 2019 levels.

Under the terms of the agreement, the budget cap for discretionary spending will rise to $1.37 trillion in 2020 and $1.375 trillion in 2021 — which doesn’t include the cost of programs like Medicare, Medicaid and Social Security that are automatically funded, according to a person familiar with the deal. That’s an increase from $1.321 trillion this year.

Republicans were pushing for more defense spending and managed to secure $738 billion in 2020 and $741 billion in 2021, including funds for overseas operations that aren’t subject to budget caps. Democrats secured $632 billion in 2020 and $635 billion in 2021 for domestic spending. Read more from Erik Wasson and Justin Sink.

Photographer: Michael Reynolds/ Pool via Bloomberg
Trump at the White House on Monday

2020 Democrats’ Timing Concerns: Democratic campaigns and party operatives are quietly expressing consternation that the agreement risks saddling the next president with a debt limit crisis that could hijack any chance to advance a first-term agenda. The timing of the July 2021 debt limit extension sets the stage for a bigger budget fight only six months into the next president’s tenure.

Democrats are particularly concerned that if they defeat Trump in 2020, Republicans could hound his successor with demands to cut spending as a price for raising the borrowing limit. Such a scenario risks consuming the new president’s first year, which tends to be the most productive in terms of passing major legislation.

“Sounds like a bad idea. Sounds like a bad idea to me,” said Stephanie Kelton, a senior economic adviser to Sen. Bernie Sanders’ (I-Vt.) presidential campaign and a Stony Brook University professor. She said if deficit reduction is the “first order of business” for a new Democratic president, that will “undermine any ability to actually deliver on the agenda that they ran on.” Read more from Sahil Kapur.

Debt Deal in the Balance—BGOV Podcast: With the House scheduled to leave town for a six-week recess Friday, lawmakers negotiated a budget deal to address spending caps and the debt ceiling. On this episode of “Suspending the Rules,” budget and appropriations reporter Jack Fitzpatrick explains the negotiations and issues at stake in a deal. He also previews this fall’s annual appropriations process.

Listen and subscribe: Apple Podcasts | Overcast | Stitcher | Spotify

Second Quarter Lobbying

Lobbying Leader Akin Gump Faces New Challenger: K Street king Akin Gump Strauss Hauer & Feld, the top-earning lobbying shop since 2014, could soon be dethroned by a fast-growing competitor. Brownstein Hyatt Farber Schreck saw revenues grow by 34% in the first half of 2019 compared to the same period last year, according to new lobbying disclosure filings. That firm has been on a hiring spree, bringing on former Democratic aides, including Pelosi’s former chief of staff Nadeam Elshami, and poaching a group of tax lobbyists from McGuireWoods Co nsulting led by former Senate Finance Committee staff director Russ Sullivan.

“We don’t have big flashy names who are the glitterati, but we have people who are very smart, substantive and well-connected who have respect of their peers in industry,” said Marc Lampkin, the managing partner of Brownstein’s Washington office.

Brownstein earned $19.2 million in lobbying fees over the first six months of this year, while Akin Gump took in $19.7 million. Read more from Megan R. Wilson.

Drugmaker Group Boosts Lobbying: The drug industry’s primary trade group increased its spending on lobbying in the second quarter, as Trump’s promised push to lower prices of prescription drugs stalled. The Pharmaceutical Research and Manufacturers of America, which represents leading drugmakers, reported spending $6.2 million in the quarter ending June 30, a 12% increase from $5.5 million in the same period last year, according to a disclosure filed to Congress by yesterday’s deadline. The group reported lobbying on several me asures that dealt with drug pricing. Read more from Jarrell Dillard.

Facebook, Amazon Set Lobbying Records: Facebook and Amazon set records for lobbying in the second quarter as Washington ramped up scrutiny of big technology companies, while Google’s spending dipped as it continued to reshuffle its influence operations. The world’s largest social media site spent more than $4.1 million on lobbying, the most among big internet platforms, an increase from its previous high in the same period a year earlier. Amazon spent more than $4 million on lobbying, topping a quarterly record in the first three mon ths of the year. Mark Niquette and Ben Brody have more.

Zinke Now Enlisting Energy, Mining Clients: Former Interior Secretary Ryan Zinke is lining up consulting clients in industries regulated by his former department at the same time he decries the ethics investigations that drove him from the Trump administration. In an interview with Bloomberg News, the former congressman and U.S. Navy SEAL dismissed the 15 ethics probes of his dealings atop the Interior Department as “BS.”

“D.C. is so angry and hateful,” Zinke said. Ultimately, he added, he stepped down from his cabinet post in January amid concerns about mounting legal bills and the fear that “all these false allegations would be a distraction.” Read more from Ari Natter and Jennifer A. Dlouhy.

Also Happening on the Hill

DOJ Tells Mueller to Stick to His Report: The Justice Department told former Special Counsel Robert Mueller that his public testimony should remain within the boundaries of his already released report on Trump and the 2016 election. Responding to a request from Mueller for the department’s guidance over his appearance at two House hearings set for tomorrow, the Justice Department said that Mueller shouldn’t discuss ongoing cases and that some details of his work may be covered by executive privilege. Read more from Billy House and Chris Strohm.

Also, Chris Strohm and Billy House preview some of the potential risks that the nationally televised hearings pose for the main actors.

Meanwhile, the House Oversight Committee will meet Thursday to consider a resolution that would hold White House aide Kellyanne Conway in contempt of Congress, after she declined to testify under subpoena earlier this month, the panel says in a statement. Conway did not previously appear for questioning on whether she violated a law prohibiting administration officials from engaging in political work while on public payroll. Read more from Billy House and Giovanna Bellotti Azevedo.

Concerns Raised Over EPA’s FOIA Rule: Senate Judiciary Committee members sent a bipartisan letter to the Environmental Protection Agency raising concerns about its FOIA Regulations Update rule being advanced without an opportunity for public comment, according to an emailed statement. The letter says the rule makes changes that “appear to run contrary to the letter and spirit of FOIA” and undermine Americans’ right to get information. The lawmakers urged EPA Administrator Andrew Wheeler to provide more time so the public is aware of the impact of the policy change before the rule takes effect, Giovanna Bellotti Azevedo reports.

Senate Finance Eyes Votes on Drug Package: The Senate Finance Committee is planning to hold a markup this week on its bipartisan package to lower drug prices, two industry sources briefed by top administration officials and staff of a committee member told Bloomberg Law yesterday. The committee will only go forward if Chairman Chuck Grassley (R-Iowa) can get assurance it will pass, one of the sources said. The package has been the focus of leaders on the committee, Grassley and top Democrat Ron Wyden (Ore.), for months and had involvement from Health and Human Services Secretary Alex Azar and White House Domestic Policy Council Director Joseph Grogan. Read more from Shira Stein .

Reining In High Prices for Older Drugs: Democratic leaders in the House will roll out in September a measure to empower the government to negotiate with pharmaceutical companies for lower prescription drug prices, the chief health-care adviser to Pelosi said. The legislation will take aim at drugs that have been on the market without competition, Wendell Primus said yesterday at an event at the Brookings Institution. Such medicines account for an outsized portion of Medicare and Medicaid spending. Read more from Alex Ruoff.

Facebook Privacy Deal Shown to Lawmakers: The Federal Trade Commission privately briefed senators on its pending privacy settlement with Facebook over the Cambridge Analytica scandal, three lawmakers said. Sen. Richard Blumenthal (D-Conn.) said he’s “very, very fearful that it will be just a pinprick penalty compared to the total assets and profits of the company.” Sens. Josh Hawley (R-Mo.) and Marsha Blackburn (R-Tenn.) declined to discuss details of their meetings. Blumenthal said members of the Senate’s Judiciary and Commerce committees were briefed by the FTC. He cautioned the details given to lawmakers might not be reflected in the final deal, which also requires approval by the Justice Department. Read more from Ben Brody and Rebecca Kern.

Higher Ed Bill: Ten student advocacy groups are teaming up to push for a reauthorization of the main federal higher education law even as lawmakers are turning their focus to other bills. The groups have individually advocated for various groups of students, including veterans, low-income students, parents and adults returning to school. By forming a coalition, the groups hope to add power to their message to lawmakers, said Kermit Kaleba, federal policy director with the National Skills Coalition. Read more from Emily Wilkins.

Elections, Politics & Probes

Biden’s Crime Plan Emphasizes Rehabilitation: Former Vice President Joe Biden today announced a criminal justice plan focused on prevention and rehabilitation that stands in stark contrast to the tough-on-crime stances he adopted earlier in his political career. The front-runner’s proposal aims to lower the prison population and reduce crime by offering incentives to states to shift priorities from incarceration to prevention through a $20 billion grant program. It also calls for investing $1 billion in juvenile justice reform and expandin g federal funding for mental health and substance abuse services and research. Read more from Tyler Pager.

Democrats to Announce Climate Change Plan: Top House Democrats today will announce a new plan for addressing climate change, as inaction on the Hill threatens to undermine environmental pitches by 2020 presidential candidates on an issue that voters identify as a priority. An effort by Democratic leaders on the House Energy and Commerce Committee comes amid growing concern the party hasn’t delivered tangible progress—or passed any major measures—in its seven months of House control. Read more from Jennifer A. Dlouhy.

Movers & Shakeups

Trump Taps Northrop Official to Safety Board: Katherine Andrea Lemos is Trump‘s pick to head the U.S. Chemical Safety and Hazard Investigation Board, the White House announced yesterday. Lemos, director of autonomy research and technology at Northrop Grumman, was picked in June to be a member of the independent agency that investigates major chemical incidents. Fatima Hussein has more.

Trump to Tap Lithuania Envoy: The White House announced Trump intends to nominate Robert Gilchrist to be U.S. ambassador to Lithuania. Gilchrist currently serves as director of the Operations Center of the State Department, the White House said. Previously, Gilchrist was a deputy chief of U.S. embassies in Sweden and Estonia, the White House said.

What Else to Know

Food-Stamp Eligibility Could Be Narrowed: Over 3 million recipients of food assistance benefits wouldn’t qualify under a rule proposal from the Agriculture Department, a top agency official estimates. The USDA announced today it will be proposing the elimination of “broad-based categorical eligibility,” a voluntary standard states can use to automatically qualify recipients of non-cash welfare assistance for the Supplemental Nutrition Assistance Program. Teaganne Finn has more on the proposal.

White House Tech Meeting Sets Stage for China Talks: The U.S. and China are moving closer to their first face-to-face trade negotiations in months, with a meeting yesterday between tech executives and senior White House officials marking another step toward easing a ban. The White House invited many of the U.S.’s biggest technology companies to discuss economic issues including a possible resumption of sales to Huawei. Trump and senior administration officials met with CEOs from Google, Broadcom, Cisco, Intel, Micron, Western Digital, and Qualcomm , according to White House spokesman Judd Deere. Read more from Shawn Donnan, Jenny Leonard and Ian King.

Also yesterday, Trump ordered the Pentagon to spur the production of a slew of rare-earth magnets used in consumer electronics, military hardware and medical research, amid concerns that China will restrict exports of the products. Trump invoked the 69-year-old Defense Production Act—once used to preserve American steelmaking capacity—to remedy what he called “a shortfall” in production of the super-strong magnets made with rare-earth minerals neodymium and samarium. Jennifer A. Dlouhy has more.

Trump Cites Request India Denies Making: Trump offered to help resolve the long-running conflict between India and Pakistan over the territory of Kashmir—citing a request from Indian Prime Minister Narendra Modi that his government later denied. “If you would want me to mediate or arbitrate, I would be willing to do that,” Trump told Pakistan’s prime minister, Imran Khan, at the White House.

Trump said it was Modi who first asked him to intervene. “We talked about this subject, and he actually said, ‘would you like to be a mediator or arbitrator?’ I said, ‘where?’ He said ’Kashmir.’” Trump met with Modi at the G-20 summit last month in Osaka, Japan, at the end of June. But a spokesman for India’s Ministry of External Affairs, Raveesh Kumar, said on Twitter that “no such request” was ever made by the Indian prime minister. Read more from Alex Wayne and Josh Wingrove.

U.S.-Iran Confrontation Could Play Out in Iraq: Drones have been downed and tankers attacked in the Persian Gulf as U.S.-Iran tensions raise fears of war around a critical oil chokepoint. But any conflict between rivals might actually start in the one country where both sides have forces on the ground: Iraq. After two wars with America since 1990, a brutal civil conflict and the rise of Islamic State more recently, about 5,200 U.S. troops are stationed in Iraq — amid thousands of Iranian-backed Shiite militias, controlled by officials in Bag hdad sympathetic to Tehran. Read more from Glen Carey.

Asylum Seekers Have Right to Bond Hearings: Immigrants who sought asylum in the U.S. have a right to a bond hearing for now, an appeals court in San Francisco ruled in refusing to pause a federal judge’s order that banned the government from detaining the people indefinitely. The Trump administration asked the panel to put the judge’s order on hold until the appeal is heard. The appeals court scheduled a hearing on the issue in October. Read more from Joe Schneider.

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