Why Trump swallowed a budget deal that bleeds red ink

Trump looked to his friend and Treasury secretary Steven Mnuchin to work with Pelosi and McConnell to strike a budget deal that avoids another risky spending fight until after the 2020 election.

President Donald Trump chose the pragmatist over the rabble-rousers.

In deciding who would lead the White House in budget and debt-ceiling negotiations with Capitol Hill, the president learned a lesson from his embarrassing government shutdown earlier this year: Brush aside the budget hawks in his own party, including acting White House chief of staff Mick Mulvaney, and focus on minimizing any drama heading into an election year.

Trump looked to Steven Mnuchin, his longtime friend, 2016 campaign official and now Cabinet member who earned a new reputation this week as a political deal-maker in Washington and helped Trump postpone any risky financial brinkmanship until after 2020.

The Treasury secretary took the lead in the five-month-long negotiations with House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell, striking a deal to raise the debt ceiling and set spending levels past the 2020 election. House lawmakers are set to vote on the agreement Thursday and are expected to approve it, despite widespread grumbling within the GOP.

“I was really impressed. It was a really challenging situation,” McConnell said in an interview. Mnuchin “spoke for the administration. And we knew that. So whatever differences they may have had, they resolved internally. And that was helpful, too, because we knew who we were dealing with.”

Trump appears pleased to move on. The president told Senate Republicans, in a meeting in the White House’s State Dining Room on Tuesday about Turkey policy, that he was happy Fox News and other conservative media had largely held their fire on the budget deal, according to two attendees. Mnuchin sat nearby as the president assessed the relatively muted friendly fire. “He was pleased it wasn’t worse. That point was made several times,” said one attendee.

Mnuchin is viewed throughout Washington as more matter-of-fact than ideological — a fact that has annoyed some die-hard members of the Republican Party. Like Trump, he is more interested in solving a problem than adhering to strict conservative principles.

“The president asked Mnuchin to negotiate a deal. And Mnuchin went to Pelosi saying, ‘How much is it going to cost me to get a debt limit increase past the election?’’’ one former senior administration official said sarcastically. “He doesn’t care about the cost. Wall Street is happy. The defense folks are happy. That’s good enough.”

Or, as Sen. Rand Paul (R-Ky.) said of the Mnuchin-Pelosi agreement: “There’s not much conservative about it.”

“There’s stories being written that this is the final nail in the coffin of what used to be the tea party movement. That’s sad. But maybe true,” he added.

In getting Trump a deal and sparing him of a crisis, Mnuchin’s standing with both Trump and congressional lawmakers has risen — thanks to his ability to speak on behalf of the mercurial president and the muted opposition to the final deal. It was something that even Vice President Mike Pence could not do in December 2018, when he assured Senate Republicans that Trump would sign a spending bill, only to have Trump backtrack days later and shut down the government.

“I don’t see this as his coming-out moment,” said David Tamasi, a fundraiser for the Trump campaign in 2016 and the reelection effort in 2020, said of Mnuchin. “He has already arrived.”

Mnuchin’s role in negotiating with House Speaker Nancy Pelosi has put him at the center of this summer’s action, even if the Treasury Department technically only oversees the machinations around the debt ceiling, one segment of the deal. Next week, Mnuchin also will travel to Shanghai with U.S. Trade Representative Robert Lighthizer to continue trade talks with China.

His ongoing involvement with trade, sanctions and the budget deal makes him one of the most powerful and long-lasting members in Trump’s often-changing Cabinet. He, Lighthizer and National Economic Council Director Larry Kudlow form what one Republican called a “strong economic frontline” heading into Trump’s reelection.

A spokesperson for the Treasury Department did not respond to a request for comment.

Senior administration officials said that, while conservatives did not get the extent of the spending cuts they wanted, the president retained the authority to transfer money within the accounts of the Homeland Security and Defense departments — key tools to help him fund his border wall.

The final budget and spending deal came together over the weekend during a flurry of phone calls, according to White House officials and Democratic aides. Pelosi and Mnuchin spoke three times on Sunday, with Senate Minority Leader Chuck Schumer joining the second call.

By Sunday night, Mnuchin called the president and other top White House officials to fill them in on the contours of the deal which the president broadly agreed to, according to two senior administration officials. House Minority Leader Kevin McCarthy also kept in close contact with the White House.

The parties then spent Monday working out the details, with Pelosi negotiating much of the deal via an aisle seat on a very delayed flight from Detroit to Washington, an aide to the House speaker said. At 5 p.m. on Monday, Mnuchin hosted a conference call with the four congressional leaders to review any outstanding issues. On that call, Mnuchin advised the leaders that Trump would tweet in the next hour. The leaders would then follow with their own statements affirming a deal had been reached.

Like clockwork, Trump tweeted out news of the tentative agreement on late Monday afternoon. “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....” Trump said via Twitter, following the plan Mnuchin laid out with the congressional lawmakers.

Mnuchin again gave the Republicans assurances that Trump supported the deal during a weekly Senate lunch, as Republicans waited for a clear signal. After the meeting with Senate Republicans, Trump delivered that endorsement on Twitter, effectively sealing the deal for congressional leaders.

Mnuchin’s performance in front of Republicans on Tuesday seemed to fall on ideological lines: Those who support the deal thought he was great. Those who don’t thought he did a poor job of selling a deal that had Democrats gleeful. Some Republicans thought Mnuchin should have taken a harder line with Pelosi, refusing to negotiate on spending until the debt limit was raised.

“He didn’t do anything. The pay-fors, offsets are a joke. It’s an accounting trick,” said one GOP senator. “It was sad. And he’s gleeful that the president loves him best for the moment.”

Earlier this spring, McConnell had pressed the president to embrace a deal this spring in a one-on-one meeting. Part of that was getting Mnuchin as the lead administration negotiator. Mnuchin seemed to carry less ideological baggage into the negotiations than his counterparts at the White House like Mulvaney, the acting White House chief of staff who battled for harsh spending cuts as a House lawmaker and Trump’s budget director, and acting director of the Office of Management and Budget Russ Vought, who also built a political career on slashing spending.

“You had the Mulvaney and Vought presence at the table,” said Senate Majority Whip John Thune (R-S.D.). “Mnuchin represented the view that would lead to an outcome and shared going in that we needed to get a caps deal, whereas, I think some of the others at the table were trying to” freeze spending at current levels.

Conservatives both inside and outside the White House remain disappointed the deal did not go further with spending cuts, but both Mulvaney and Vought are going along with it.

Vought went on Fox News on Tuesday to defend it. “I love the concern of the conservatives who are bringing attention to the problems that we have with fiscal responsibility in this town. This president put forward more spending cuts than any president in history,” Vought said. “We’re now up against a deadline, heading into the August recess, where we need the debt limit extended. We need to continue to rebuild the military.”

The president’s endorsement of the budget deal will almost certainly push it across the finish line, even if the angst among conservatives is real.

“It’s a lot of spending. It makes it difficult,” said Sen. Marco Rubio (R-Fla.). “It’s a tough one to swallow. I get it, no one wants a shutdown and I don’t want to see us going over the fiscal cliff, but it’s just a lot of spending.”

Trump has told top White House officials and outside allies he intends to cut spending in his second term if he wins reelection, according to a senior administration official — though he will target discretionary spending and not touch Medicare or Social Security. It’s a vow that will be extremely hard to implement unless Republicans make huge congressional gains in 2020.

But that signal could please Republicans who are more aligned with Vought and Mulvaney.

The fact that Mnuchin was elevated above two true tea party die-hards came as little shock to hard-line conservatives. “I’m not surprised — because the Republicans in the Senate are not going to stand with the president on any kind of spending cut. Republicans are not trying to cut spending,” said former Sen. Jim DeMint (R-S.C.), a forefather of the tea party.

Republicans close to the White House insisted that Trump picked Mnuchin to lead the negotiations because he wanted a deal, whereas Mulvaney might have pushed for deeper cuts and alienated congressional leaders. Back in December, Mulvaney urged the president to shut down the government to fight for more funding for a border wall.

The shutdown lasted for 35 days — giving Republicans no policy victories and forcing Trump to cave under Pelosi’s firm grip over her caucus.

Mnuchin’s shepherding of the deal shows how far he has come politically since he arrived in Washington. Earlier in his tenure, Mnuchin angered House Republicans by visiting Capitol Hill and asking them to vote for the debt ceiling and to do it for him — a move many saw as tone-deaf and arrogant.

But Mnuchin kept at it, strengthening his relationships with some key Senate Republicans during tax reform, hosting small breakfasts at Treasury for lawmakers and growing more comfortable in his political role in Year Three of the Trump presidency.

Mnuchin’s only major disagreement with the president was his backing of Jay Powell to lead the Federal Reserve — a move Trump has held against him as the Fed raised interest rates and dented markets late last year.

The two are now back on good terms, say senior administration officials and outside White House advisers, as the Fed prepares to backtrack and the stock market hovers at record levels.

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