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Steven Mnuchin, U.S. Treasury secretary, speaks during a press briefing at the White House in Washington, D.C., U.S., on Monday, July 15, 2019.
Al Drago | Bloomberg | Getty Images
The White House and congressional Democrats have moved close to a budget deal that would raise the U.S. debt ceiling for two years, a source close to the talks told CNBC.
An agreement to prevent the U.S. from hitting its borrowing limit and stop government funding from lapsing is “near final,” the person said. Remaining talks relate to “technical language issues,” according to the source.
The developing deal would suspend the debt ceiling through July 31, 2021. It would permanently end the sequester, automatic across the board spending cuts. A sequester would have taken effect in January without congressional action.
The budget agreement would include parity between increases in defense spending and domestic, non-defense outlays — a priority for House Speaker Nancy Pelosi. It would also have about $75 billion in spending offsets, measures conservatives have backed.
It would set spending at $320 billion above sequester levels for fiscal years 2020 and 2021. The figure covers both defense and non-defense discretionary outlays.
The developing deal will face resistance. Some conservatives who have called for deeper spending reductions pushed for the White House to reject the potential agreement as details emerged in recent days.
Rep. Mike Johnson, a Louisiana Republican and chairman of the roughly 150-member Republican Study Committee, told CNBC that the group is “discouraged” by the developing agreement. The lack of future spending cuts is “perhaps our greatest concern,” he added.
Johnson spoke to President Donald Trump on Saturday and shared his concerns about the potential deal. He said Trump “understood the sentiments I was expressing.”
It remains to be seen whether Trump supports the potential agreement. On Monday, he said the White House is having “very good talks” with congressional leaders on raising the debt ceiling.
Johnson said he is not worried about a possible default if Trump ends up sinking the deal. He expects Congress would temporarily raise the debt ceiling before the U.S. faced the real possibility of defaulting on its debt.
Lawmakers have scrambled to strike a deal before they leave for their August recess. Treasury Secretary Steven Mnuchin warns the U.S. could run out of cash to pay its bills by September, setting up the potential for default on the federal debt.
In addition, the government will shut down if Congress cannot pass a spending bill by Sept. 30. While a default would reverberate throughout the global economy and financial markets, a temporary government funding lapse could drag on U.S. economic growth.
Last week, Pelosi said she hopes to bring a budget deal to the House floor by Thursday — the last day the chamber is in session before lawmakers leave for the month of August. She believes it would give the Senate enough time to pass legislation before the chamber departs for its recess next week.