Trump Strikes Deal With Democrats: Debt Limit, Harvey Funds

By RACHAEL BADE, BURGESS EVERETT and JOSH DAWSEY Updated at 2017-09-07 16:28:01 +0000

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By RACHAEL BADE, BURGESS EVERETT and JOSH DAWSEY

Donald Trump, who casts himself as a master negotiator, took the first offer Democrats put on the table.

Republicans left the Oval Office Wednesday stunned. Trump had quickly sided with Democrats on a short-term debt ceiling increase, even overruling his own Treasury Secretary Steven Mnuchin to concur with "Chuck and Nancy," as he later called them on Air Force One.


BY RACHAEL BADE, BURGESS EVERETT and JOSH DAWSEY of Politico

But Trump defied more than his top aides. He turned on Republican leaders in Congress when he caved to Democrats’ demands to raise the debt limit and fund the government for three months, setting up a brutal year-end fiscal cliff. The move shocked everyone, as top White House officials and GOP leaders had been gearing up to raise the debt ceiling through the 2018 midterm election, looking to pass legislation as soon as Friday.

But even after Mnuchin, Speaker Paul Ryan and Senate Majority Leader Mitch McConnell pushed back on the Democratic demands in the meeting, Trump agreed to the three-month deal that will also head off the possibility of a government shutdown until mid-December.

During the meeting, Ryan sharply criticized the Democratic proposal, a source familiar with the exchange said. But Schumer reminded him that Ryan had supported short-term increases in the past intended to help create bipartisan deals in 2013.

So after Democrats rejected GOP proposals to raise the debt ceiling for 18 months, and then six months — Trump endorsed Schumer’s three-month pitch.

The Treasury Department will likely be able to buy more time for Congress on the debt limit into 2018. But the Wednesday deal still means Congress will have to raise the debt ceiling, negotiate a massive trillion-dollar spending bill, and potentially hash out a deal on immigration all at once or in quick succession.

Democrats were gleeful.

"Both sides have every intention of avoiding default in December and look forward to working together on the many issues before us," said Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi.

Trump also touted his actions on Air Force One en route to North Dakota for an event on tax reform.

"We essentially came to a deal and I think the deal will be very good," Trump said.

Capitol Hill Republicans, loath to vote twice to raise the debt ceiling, were less than pleased. They said privately that Trump caved too quickly, relinquishing the GOP’s leverage. And they worried that Trump would do the same in future deals.

"I think our members would probably want to see something that goes significantly longer than that," said Sen. John Thune of South Dakota, the No. 3 GOP leader, when asked about the short-term debt limit proposal.

One senior Republican aide spoke more bluntly on background: “The president of the United States just handed a loaded gun to Nancy Pelosi and Chuck Schumer.”

The meeting came after congressional Democrats turned the screws on the president and GOP leaders, who need Democratic votes to raise the debt limit and avert a default.

Democratic leaders said Wednesday morning that they'd offer Trump their votes for a package delivering aid to victims of Hurricane Harvey and raising the debt ceiling only until mid-December. GOP leaders, eager to avoid multiple contentious votes on the debt ceiling, want to raise the debt ceiling through late 2018.

“Given Republican difficulty in finding the votes for their plan, we believe this proposal offers a bipartisan path forward to ensure prompt delivery of Harvey aid as well as avoiding a default, while both sides work together to address government funding, DREAMers, and health care,” Schumer and Pelosi said in a joint statement.

The move by congressional Democrats was intended to preserve their leverage later this year on other issues, even though in the past, Democrats, including both Schumer and Pelosi, have said the debt ceiling should not be a topic of negotiation. But Democratic leaders were emboldened because Republicans needed significant Democratic support on the spending and debt legislation, which is expected to split congressional Republicans.

Indeed, significant numbers of Republican defections were expected on the legislation, and debt ceiling votes typically draw opposition from conservatives who demand spending cuts in return.

During a Wednesday morning press conference Speaker Paul Ryan blasted Democrats’ opening salvo as “ridiculous and disgraceful,” accusing them of playing politics “at a moment when we have fellow citizens in need.”

“Let's think about this: We’ve got all this devastation in Texas. We’ve got another unprecedented hurricane about to hit Florida. And they want to play politics with the debt ceiling?” Ryan (R-Wis.) said. “That will strand the aid that we need to bring to the victims of these storms.”

That's the exact message the White House had been sending to Capitol Hill. FEMA officials told lawmakers Tuesday that they'll run out of emergency funding as soon as Friday. Compounding that, Treasury officials began arguing they couldn't pay FEMA claims to victims unless the debt ceiling is increased immediately.

That's why GOP leaders told House Republicans during a closed-door conference meeting Wednesday that Republicans would remain in town — even through the weekend — until a Harvey-debt ceiling package is signed by the president.

But Trump upended GOP leadership's plans during the White House meeting. Sources familiar with the discussions said Ryan and McConnell made it clear that they didn’t agree with Schumer or Pelosi. When Democrats wouldn't agree, they pushed for a six-month debt ceiling increase instead of the full 18 months.

Trump appeared to tire of the back and forth when Democrats wouldn’t cave to the six-month increase. He struck a deal — or at least, what he saw as one — cutting Mnuchin off mid-sentence as he argued against the merits of a short-term debt increase. The room went silent. Everyone was stunned.

Republicans returned to the Capitol disheartened. They thought they could call Democrats' bluff on the matter and were ready to exit the meeting as a standstill. One senior GOP aide said the whole experience was "mystifying.”

“Maybe it's about the wall, I don't know,” this person said. “None of it makes any sense.”

Unlike now, Republicans in December won’t have a disaster relief bill to help win support for a debt ceiling increase — always a tough vote for Republicans — said another GOP source.

Democratic leadership staff began discussing a short-term debt ceiling strategy before the August recess, according to several Democratic sources following the talks. Some staff floated the idea of only agreeing to temporary increases in the debt ceiling until Republicans promised that tax reform will not add to the deficit.

The ongoing conversation suggests Democrats were ready to play hardball on the debt ceiling even before the hurricanes that have threatened Texas, Louisiana and Florida.

The short-term debt-limit strategy allows Democrats to say they're not flirting with default but also buys them the time they want to negotiate and use their leverage for other big-ticket items from immigration to government funding. The items mentioned in their Wednesday release — a debt limit hike, government spending, hurricane aid and protection for Dreamers — could in theory be rolled into one giant package later this year, though Democrats are more focused on ensuring that all those measures are bipartisan, according to Democratic aides.

But two debt limit votes would be painful for Republican leaders, who are already pulling teeth to get one increase in the nation's borrowing limit over the finish-line. Trump himself, GOP leadership sources say, will have to get involved to muster enough Republican votes for a single Harvey-debt limit package — and that's assuming every Democrat backs the bill.

“No one wants to revisit this,” said Rep. Chris Collins (R-N.Y.) coming out of the GOP conference meeting.

Not all Republicans hated the idea when Democrats floated it, however. One GOP leadership ally, Rep. Tom Cole (R-Okla.), suggested he wasn't opposed to the Democrats' proposal.

“Look, a short term increase in the debt limit so that they can handle this is a sensible thing, in my view," the Oklahoma Republican said, arguing that it might even be preferable to leadership's long-term debt increase strategy. "That’s not like an 18-month deal.... I think it would have a lot more difficulty than something short term. So we’ll have to wait and see."

After the deal was struck, Sen. John McCain (R-Ariz.) defended the president’s actions: "I don't know that he sided with the Democrats. He made an agreement.”

John Bresnahan and Seung Min Kim contributed to this report.

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