Congress strikes two-year US debt ceiling and budget deal

President Donald Trump and congressional leaders struck a two-year U.S. debt ceiling and budget deal Monday, the president announced via Twitter.

Donald J. Trump✔@realDonaldTrump
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....

House of Representatives Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer released a joint statement, saying the deal “will enhance our national security and invest in middle class priorities that advance the health, financial security and well-being of the American people.” 

Earlier Monday, a source close to the talks told CNBC that the White House and congressional Democrats had moved close to a budget deal that would raise the debt ceiling for two years.

An agreement to prevent the U.S. from hitting its borrowing limit and stop government funding from lapsing is “near final,” the person said at the time. Remaining talks relate to “technical language issues,” according to the source.

The deal was earlier expected to suspend the debt ceiling through July 31, 2021 and permanently end the sequester, automatic across the board spending cuts. A sequester would have taken effect in January without congressional action.

A budget agreement is ‘near final’, source says

The budget agreement was earlier expected to include parity between increases in defense spending and domestic, non-defense outlays — a priority for Pelosi. It was also expected to have about $75 billion in spending offsets, measures conservatives have backed.

It was earlier expected to 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 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 deal. He said Trump “understood the sentiments I was expressing.”

Johnson said he was not worried about a possible default if Trump had sunk 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.

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