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Mnuchin: Budget Deal With Pelosi Close 07/16 06:17

   It's House Speaker Nancy Pelosi and top Senate Republican Mitch McConnell 
vs. hardliners in the White House as lawmakers pursue a deal on federal 
spending and the debt. And the hardliners, wary of further increases to federal 
spending, appear to be losing.

   WASHINGTON (AP) -- It's House Speaker Nancy Pelosi and top Senate Republican 
Mitch McConnell vs. hardliners in the White House as lawmakers pursue a deal on 
federal spending and the debt. And the hardliners, wary of further increases to 
federal spending, appear to be losing.

   Talks between Pelosi and Treasury Secretary Steven Mnuchin appear to be 
progressing. Mnuchin on Monday told reporters, "I think we're very close to a 
deal," though he cautioned that "these deals are complicated."

   Mnuchin says increasing the $22 trillion debt limit needs to be done this 
month to avert any risk of a U.S. default on obligations like bond payments. He 
said he doesn't think there will be a government shutdown when the budget year 
ends Sept. 30, nor does he think "either party or anybody wants to put the 
credit of the United States government at risk."

   Previous negotiations toward a budget deal had included White House 
conservatives like Acting Chief of Staff Mick Mulvaney. But Mnuchin is taking 
the lead for the administration in the talks with Pelosi, as the speaker 
doesn't have a productive relationship with Mulvaney.

   Mnuchin and Pelosi spoke again Monday evening.

   The talks increasingly hinge on a durable, powerful and familiar political 
coalition: GOP defense hawks demanding bigger Pentagon budgets and Democrats 
seeking equal treatment for domestic priorities.

   Three previous fiscal deals over the past years, conducted when Democrats 
were in the House minority, were greased by lawmakers' appetite for both guns 
and butter --- to the dismay of deficit hawks relegated to Washington's 
endangered species list. Now, after winning back the House, Pelosi has greater 
leverage, especially because of the need to increase the government's borrowing 

   "We gave them an obscene amount of money just two years ago," said Hazen 
Marshall, a former Senate GOP budget and leadership aide. "And now they want 
more on top of that. There's a never-ending desire to keep on ramping it up."

   Lawmakers are negotiating an increase to spending "caps" for federal agency 
budgets, along with separate must-do legislation to increase the government's 
debt limit. The negotiations are opaque, but appear to be guided by the concept 
of "parity" in spending increases for defense and nondefense agency budgets, 
based on a public exchange of letters between Mnuchin and Pelosi over the past 
few days.

   The duo of Pelosi, D-Calif., and McConnell, R-Ky., is a partnership of 
necessity. The two have a chilly but professional relationship and their 
interests rarely align. But when they team up --- as they did on a government 
spending deal in February --- they are virtually unstoppable. Both have long 
histories with Capitol Hill's appropriations process, the painstakingly 
bipartisan and pragmatic job of annually divvying up the one-third of the 
federal budget allocated by Congress each year.

   Pelosi's mandate is to increase, as much as possible, the portion of the 
federal pie going to Democratic priorities such as health care, education, 
housing and the environment.

   McConnell played a key behind-the-scenes role in setting up the negotiations 
and has encouraged Mnuchin's central role. He wants a deal that would satisfy 
his defense hawks and his pragmatic-minded power base on the Appropriations 
Committee. He also knows that the path to a successful deal goes through Pelosi 
and is likely to include more money than Mulvaney, a former tea party lawmaker, 
would like.

   The alternatives to a deal are distasteful to both sides, and include 
freezing spending at current levels and operating most of the government 
essentially on autopilot under a measure known as a continuing resolution. That 
prospect, talked up behind the scenes by Mulvaney and his allies, is alarming 
to GOP lawmakers focused on Pentagon policy, who say it would harm military 
readiness, hurt efforts to relieve procurement shortfalls and scramble 
long-term Pentagon budget strategies.

   The negotiations are closely held but a key concern for Pelosi is getting 
$22 billion over the next two years to cover the rapidly-growing cost of 
privately-provided veterans health care. She sent a letter to Mnuchin on 
Saturday night agreeing with his request to increase the debt limit but pushing 
for relief for the Veterans Administration's private health care program, which 
threatens to squeeze other domestic priorities.

   "I wanted to put in writing what our concern was," Pelosi said Monday. "We 
have an additional initiative that was added, but you can't just take it out of 
other veterans programs or other programs."

   Republicans say those VA costs should be absorbed inside the $600 billion 
set aside for nondefense agencies.

   Pelosi appears to be dropping another demand, a $7 billion carve-out to pay 
for the U.S. Census.


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