President Donald Trump made clear to Hill GOP leaders Tuesday that Treasury Secretary Steven Mnuchin — not Office of Management and Budget Director Mick Mulvaney — is the administration’s point person on the suddenly critical issue of raising the debt ceiling.
“Mnuchin is that guy,” Trump told party leaders at a White House meeting, according to GOP sources. The comments seem to settle, for now, what was a burgeoning battle inside the administration — though it won’t make the upcoming debt limit vote any easier for congressional Republicans.
Capitol Hill and Wall Street have struggled to understand who speaks for the White House on key fiscal issues, including the debt limit and funding the government past September 30, when the current spending deal runs out. Like nearly everything so far in the Trump White House, there were multiple voices with multiple messages, which was starting to unnerve even GOP lawmakers, especially on the debt ceiling.
House and Senate GOP leaders pressed Trump on the debt ceiling issue during a private meeting in the White House Tuesday, particularly whether they should follow the lead of Mnuchin or Mulvaney, who have publicly staked out drastically different positions on the matter in recent weeks.
“I think Steve Mnuchin is ultimately going to be the person that is going to lead those conversations so, we’re going to have to see what he says in terms of the timing,” House Majority Whip Steve Scalise (R-La.) told reporters after the White House sessions.
“The Treasury secretary is always the point,” added House Majority Leader Kevin McCarthy (R-Calif.).
In recent weeks, Mnuchin has repeatedly called for a “clean” debt limit hike before Congress leaves for its August recess, suggesting a failure to pass such a bill by then could risk default.
But Mulvaney, a fiscal hawk and hardline conservative when he served in Congress, said last week that he would “like to see things attached to it that drive certain spending reforms and debt reforms in the future.”
Mulvaney also suggested Mnuchin’s congressional testimony favoring a clean debt ceiling increase did not necessarily reflect the official position of the Trump administration.
Mulvaney is among those Republicans who believe that if the debt limit is not raised in time, Treasury could “prioritize” payments on existing debt to make sure the government does not go into official default to U.S. Treasury bondholders. Mulvaney wants to tie raising the debt limit to fiscal reforms, something favored by spending hawks in the House Freedom Caucus and beyond. Mulvaney advocated this position during his entire tenure in Congress.
However, this distinction is not generally recognized on Wall Street where the failure of the U.S. government to make any payments previously authorized by Congress is widely viewed as a default that would rock world financial markets.
Inside Treasury, officials understood that mixed messaging on the debt limit was a major problem both for Hill Republicans and markets. And they have been eager for Trump to make it clear that Mnuchin was the leading voice on the issue and his statements should be considered the official administration position.
An OMB spokesman played down the strategic rift and said Mulvaney had always made clear Mnuchin is at the top of the hierarchy.
"We’ve always said the secretary of Treasury has point on the debt ceiling," the spokesman said.
Mulvaney, though, did have some allies inside the White House on this issue. National Economic Council Director Gary Cohn, who is generally aligned with Mnuchin on matters of fiscal policy, further clouded matters on Friday when he appeared to side with Mulvaney on the question of attaching spending cuts to a debt limit hike, something that Democrats would almost certainly reject.
“At the end of the day, Congress is going to raise the debt ceiling because they have no other choice,” Cohn said in an interview on CNBC. “The Treasury secretary would love to do a clean debt ceiling — I get that. But if we need to get things attached to get it through, we’ll attach things.”
Full GOP control of Washington was initially expected to make debt limit fights easier. But the lack of a clear message out of the White House and internal Republican squabbling over how to raise the borrowing limit is raising the specter of previous bruising fights over the issue.
The intraparty rift has increased the Democrats’ leverage, with party leaders threatening to make the debt-ceiling vote difficult for Republicans if the GOP pursues budget-busting tax cuts.
A debt limit crisis in 2011 led to the first credit rating downgrade in United States history and sent Wall Street’s fear gauge to its highest level since the 2008 financial crisis. The tremors in markets and the sharp “sequester” spending cuts made as part of the deal to lift the debt limit are widely cited by economists as slowing down the recovery from the financial crisis.
On Capitol Hill, there was confusion about who to listen to over the issue — Mulvaney or Mnuchin.
“My sense is both of them have something to say about that,” said Senate Majority Whip John Cornyn (R-Texas), who seemed to side with Mulvaney’s approach of seeking some spending cuts. “We need to get enough votes for it but it may take doing something that actually does something about the debt to do it.”
And some Republicans said they saw Mulvaney’s stance as the administration’s position given that he is respected by GOP conservatives and is more in tune with what the right wants.
“Mulvaney is speaking for the administration. Absolutely,” said Sen. Tim Scott (R-S.C.). “Mulvaney being a Freedom Caucus guy … likely will have the most credibility to talk.”
All this led to confusion for many Republicans.
Sen. John Thune (R-S.D.), the No. 3 Senate Republican, had said he “wasn’t sure what to make” of the administration’s clashing viewpoints and said he had no real inkling of what the president himself wants.
“My guess is it’s Mnuchin because Treasury is the agency that’s principally responsible for paying our debts,” Thune added. “But I think Mulvaney is doing what he has to do, and as the OMB guy, he’s saying we have to balance the budget.”
Rachael Bade contributed to this story.