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Debt fight blindsides Congress

President Donald Trump’s top economic aides are urging Capitol Hill leaders to raise the debt ceiling by the end of July. And Congress is totally unprepared to do so.

Lawmakers in both parties thought they’d have until the fall to act, and they had planned to roll the always-difficult vote into a broader spending package that could be more easily swallowed. That strategy may now have to be tossed aside with the debt limit deadline approaching faster than expected.

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The White House request raises the prospect of a bruising fight over the debt limit — not just between Republicans and Democrats but within both parties. The GOP is torn over whether to combine spending cuts with the debt ceiling lift, and Senate Democrats are already signaling they may push for their own concessions because their votes are going to be needed to avoid a devastating government default.

The request will also scramble the congressional calendar. The GOP is currently embroiled in an effort to repeal Obamacare and rewrite the tax code, two massive legislative items that are expected to suck up time and energy all summer. And now, they’ve been caught flat-footed by last week’s pleas from White House budget director Mick Mulvaney and Treasury Secretary Steven Mnuchin.

“I just don’t think it’s on the front burner,” said senior House Budget Committee member Tom Cole (R-Okla.), a leadership ally. “So far, I haven’t heard that much discussion about it.”

“We have to do it. We can’t let the government default,” said Senate Finance Chairman Orrin Hatch (R-Utah). But, he added, “I don’t know if it has to be done” before the August recess.

The debt ceiling exercise is one of the most painful that Washington endures, often rattling financial markets and paralyzing the Capitol.

Republicans in recent years have pushed for massive spending cuts to accompany new debt authority — much to the chagrin of Democrats demanding “clean” debt ceiling increases without policy strings. In 2011, the GOP’s fight over the debt ceiling resulted in a credit downgrade and the sequester cuts loathed by Democrats and hawkish Republicans. In 2014, the Senate shut off the chamber’s microphones and held a debt limit vote open for more than an hour to avoid spooking Wall Street again.

This time, Republicans control the White House and Congress, and so the burden for action falls most heavily on them.

Mnuchin urged Congress to quickly pass a clean debt ceiling hike. But others in the administration, like Mulvaney, who pushed budget brinkmanship as a tea party-backed lawmaker, may not be so supportive.

“Am I worried?” asked Sen. Bill Nelson (D-Fla.). “I most certainly am, with a budget director who as a congressman said ‘Let the government go into default.’”

The GOP is already divided over what to do. Conservatives in both chambers are pushing for spending cuts as part of any deal to avoid default, with the House Freedom Caucus on Thursday taking a formal position opposing a clean hike.

Those demands give Democrats leverage because GOP leaders will need bipartisan support to pass the Senate’s 60-vote threshold and likely in the majoritarian House as well. If House Speaker Paul Ryan can’t count on conservatives to help them, he will need to rely on significant Democratic votes to avoid default.

Some Republicans assume that because Democrats consistently helped President Barack Obama raise the debt limit, they will do so again, giving the right room to vote against a debt ceiling increase.

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“It doesn’t make any sense for the Democrats not to raise the debt ceiling because they’re the ones that want to spend all the money,” said Sen. Rand Paul (R-Ky.), who will oppose a debt lift without cuts.

House and Senate Democrats, however, are divided over whether to give Trump the clean debt ceiling increase that Mnuchin is demanding. House Minority Leader Nancy Pelosi (D-Calif.) said in a statement: “The Republican Majority should pass a clean debt limit increase and not risk the full faith and credit of the United States.” Some Democrats believe it would be hypocritical for their party to push for policy concessions after years of demanding debt hikes without them.

But Sen. Chris Murphy (D-Conn.) said, “Everything’s negotiable” and asked: “Why would we make it easier for them to pass unpaid-for tax cuts by giving away a vote on raising the debt ceiling?”

Senate Minority Whip Dick Durbin (D-Ill.) agreed, adding: “Put me in that camp” of Democrats looking for leverage.

There is no caucus-wide Democratic strategy yet in the Senate, and Sen. Chuck Schumer of New York, the minority leader, will be careful not to rattle the financial markets based in his home state.

However, there are several items that Democrats could demand to move in tandem with a debt limit increase. Some options include extending the Children’s Health Insurance Program, which expires in September, or agreeing on a spending deal that avoids the dramatic cuts proposed by the Trump administration and congressional Republicans.

“We should consider what additional conditions we might want to consider imposing,” said Sen. Richard Blumenthal (D-Conn.).

Several House Republican aides said Democrats are dreaming if they think they can elicit new spending concessions to raise the debt ceiling. One noted that a clean hike will be painful enough for the GOP — a party whose mantra is to shrink government spending.

One option for Republicans to avoid turning to Democrats is to use the fast-track budget tool known as reconciliation to pass a partisan debt bill — likely with massive spending cuts, the House GOP source argued. That plan, however, risks running afoul of conservatives pushing for steeper cuts than leaders are willing to offer and could risk default.

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“It’s either a clean one, with Democratic votes, or a Republican-only thing with some cut or reform attached to it,” the staffer said.

Republicans have internally discussed the matter very little, according to lawmakers in both chambers. Senate Majority Leader Mitch McConnell and Ryan may have a grand plan in mind, but, if they do, it’s being privately held by the GOP leaders.

“I haven’t thought a lot about that. I know it’s hanging out there,” said Sen. John Thune of South Dakota, the No. 3 Senate Republican. “It’s gonna be complicated.”

Ryan told reporters last week that he is “talking with our members and the administration on how we resolve the debt ceiling.” He also seemed somewhat surprised by the administration’s warning that Congress needs to pass a debt ceiling increase soon.

“The timing is what I think is the newsworthy thing here,” the Wisconsin Republican said. “[Tax] receipts aren’t quite what people thought they were … so we’re looking at that new timetable.”

Few Republicans are publicly calling for a clean debt ceiling increase right now, given the lack of direction from leadership. But GOP lawmakers know they can’t be the ones responsible for another fiscal crisis, and there’s worry about the mere possibility.

“I don’t want to say that it has to [be] clean, as we say, because there may be some proposals that make sense to include,” said Sen. Susan Collins (R-Maine). “But my No. 1 goal in dealing with the debt ceiling is making sure we don’t default.”

Seung Min Kim contributed to this report.

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