Reuters News - Trump, Congress leaders reach deal on debt limit, spending caps

WASHINGTON (Reuters) - President Donald Trump and U.S. congressional leaders reached a deal on Monday on a two-year extension of the debt limit and federal spending caps that would avert a feared government default later this year but add to rising budget deficits.

“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,” Trump said on Twitter.

Schumer and Pelosi promptly issued a statement confirming the agreement, saying the measure would be voted on “swiftly” in the Democratic-led House of Representatives. The Republican-led Senate must also pass the measure before it can be signed into law by Trump.

Pelosi has been pushing to win passage by this week, before the start of a long summer recess that extends to Sept. 9.

Final details between the Trump administration and congressional leaders were worked out as Pelosi talked by telephone from a delayed commercial flight to Washington following a speech she delivered earlier in the day in Detroit, a Pelosi aide said.

Under the agreement, which was the result of weeks of closed-door negotiations, the Treasury Department’s borrowing authority would be extended through July 31, 2021. Without legislation, Treasury could bump up against its borrowing limit before Sept. 9, according to some recent estimates, potentially triggering a default on some debt.

The pact would also set overall spending levels for the next two years on both defense and non-defense programs operated by the federal government.

Under the deal, spending on those “discretionary” programs would rise to $1.37 trillion in the fiscal year starting Oct. 1, up from $1.32 trillion this year, according to a congressional source.

In fiscal 2021, spending would rise at a slower pace, to $1.375 trillion.

Of the $1.37 trillion next year, military spending would reach a maximum of $738 billion, up from $716 billion this year. Non-defense appropriations would be capped at $632 billion in fiscal 2020, up from $605 billion this year.

McConnell, a Republican, praised the pact, saying it “secures the resources we need to keep rebuilding our armed forces,” while not specifically mentioning rising non-defense outlays.

A senior Democratic aide in Congress noted that if enacted into law, non-defense domestic funding would be $100 billion higher than when Trump took office in January 2017 - a figure likely to bring criticism from conservatives.

Earlier on Monday, a source close to the talks said the deal would include about $75 billion in what are being described as partial “offsets” to higher spending over the next two years.