With time running short, it is looking more and more likely that the hot topic of July through September will be the FY 2020 budget. That budget debate now involves funding levels for the upcoming FY 2020, FY 2021 budgets as well as raising the debt ceiling. It is now believed that the debt ceiling will be reached by mid-September.

For several weeks Senate Republicans have been looking for a different path from the Administration. Fifteen Republican senators signed a letter to the Trump Administration in early July asking the President not to propose or demand a year-long continuing resolution (CR) that would freeze military and domestic spending levels at fiscal 2019 levels through fiscal 2020. Indications are that Senate Republicans would like a two-year budget deal to get them through the next election. The Administration proposal would raise or suspend the debt limit for one year. On spending, Democrats in the House are willing to go as high as $733 billion in defense spending (with some House Democrats unwilling to go that high) but Congressional Republicans are seeking a bigger increase to $750 billion. In either case Democrats want an equally big increase in non-defense spending. In addition, Democrats want to assure that there is a significant increase in funding for the U.S. census, seeking $8 billion separate from any budget caps. (see below census story).

The Republican Senators who signed the letter are aligned with Senate Majority Leader Mitch McConnell (R-KY) who has indicated an interest in a two-year deal on spending caps under the Budget Control Act. They also want a quick agreement on the debt ceiling. The debt ceiling is getting closer and more quickly. The Treasury has used what are called “extraordinary measures” to avoid a default on the federal debt and will likely need a debt limit measure by mid-September, a move up from the earlier projection of October.

On Thursday House Speaker Nancy Pelosi (D-CA) raised the possibility of enacting a raise in the debt ceiling before Congress departs for the annual August break. It would seem unlikely that a debt deal would be reached without some understanding if not agreement on a budget deal since the debt ceiling provides significant congressional leverage with the President.

Secretary of Treasury Steve Mnuchin continues to be the key negotiator for the White House. He has had several conversations with Speaker Nancy Pelosi (D-CA) the key spokesperson for the Democrats.

Last week the House started to move on a Defense Department authorization the first annual step to passing a Defense Department Appropriations bill. It also looks like the House will not act on a Legislative Branch Appropriations or Homeland Security bill in July. The Senate also made clear they would not start their appropriations until a budget deal is complete.