Pelosi ready for deal on borrowing limit, spending levels

House Speaker Nancy Pelosi of Calif. listens to a question as she meets with reporters on Capitol Hill in Washington, Thursday, July 11, 2019. (AP Photo/Andrew Harnik)

WASHINGTON (AP) — House Speaker Nancy Pelosi said Thursday that she wants to complete a deal with President Donald Trump this month that would raise the government's borrowing limit and set spending levels for the coming budget year.

Pelosi's office said the California Democrat spoke twice with Treasury Secretary Steven Mnuchin on Thursday, and she told reporters she is convinced that the double-barreled negotiation — to prevent a first-ever default on U.S. obligations and prevent automatic spending cuts — needs to be completed before Congress leaves Washington for its August recess.

Mnuchin and Pelosi are taking the lead in the talks, which are backed by a bipartisan quartet of top congressional leaders and the White House. Pelosi has made clear her distaste for other administration officials, including Acting Chief of Staff Mick Mulvaney, a former tea party congressman, saying they are unproductive negotiators.

Mnuchin has been urging lawmakers to raise the so-called debt limit soon, warning that the government risks defaulting on U.S. obligations in early to mid-September. Pelosi and Capitol Hill GOP leaders want to pair the unpopular debt measure with a new spending "cap" for the approximately $1.3 trillion in agency budgets appropriated by Congress each year.

Pelosi didn't say she was "realistic" about the chances of a deal, but it is clear this week's round of talks with Mnuchin — three conversations so far and another scheduled for Friday morning — are serious.

"When we have an announcement we will have an announcement," Pelosi said.

Lawmakers, especially Republicans, greatly dislike votes every year or two to increase the government's borrowing cap, currently set at $22 trillion. But allowing a first-ever default on government obligations such as Treasury redemptions, payments to contractors, and federal employee payroll could rattle financial markets and harm the government's credit rating.

The spending side of the negotiation is fueled by Democratic demands for non-defense accounts and GOP defense hawks' demands for increases for the Pentagon. The House has passed most of its spending bills, but the Senate has not even started, causing unease for lawmakers such as Majority Leader Mitch McConnell, R-Ky., who has tried to revive the chamber's appropriations process.

Hardliners such as Mulvaney have suggested a spending freeze at the generous levels permitted under the expiring spending pact, but there's pressure from all sides for more spending. Among the complications: what to do about a spike in costs for the U.S. Census and billions of dollars for private-sector health care for veterans.