Mnuchin Says Treasury Could Run Out of Cash in Early September

Treasury Secretary Steven Mnuchin said the government could run out of cash in early September, before Congress returns from its August recess, and urged lawmakers to raise the federal borrowing limit before they leave town at the end of the month.

In a letter to House Speaker Nancy Pelosi (D., Calif.) Friday, Mr. Mnuchin said it is impossible to identify precisely when the Treasury will exhaust its “extraordinary measures,” which it has been using to keep paying the government’s bills on time since March 2, when the debt ceiling was reinstated after a prior suspension.

“Based upon projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” Mr. Mnuchin said. “As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”

Mrs. Pelosi told reporters after speaking with Mr. Mnuchin on Thursday evening that she hoped to reach an agreement to raise the debt ceiling and set new spending levels before the House leaves Washington for the August break on July 26.

“I am personally convinced that we should act on the caps and the debt ceiling,” she said. “Prior to recess.”

The two were expected to speak again on Friday, according to an aide for Mrs. Pelosi.

The Treasury has been warning lawmakers since May that it may exhaust its ability to pay its bills in late summer. A new estimate released Monday by the Bipartisan Policy Center suggested the government could hit the X-datein the first half of September, raising pressure on lawmakers to suspend or raise the federal debt ceiling sooner than they had expected.

If the government can’t borrow more money, the U.S. could be unable to meet all of its obligations, including salaries, benefits and potentially, interest payments on federal debt. Such a default would have unknown financial and economic consequences, and lawmakers have walked right up to the deadline in the past but avoided breaching it.

The earlier debt-limit deadline has thrown a wrench in negotiations over where to set federal spending levels next year. Lawmakers have been assuming that a spending deal for the fiscal year beginning Oct. 1 would include a debt-limit increase.

Mrs. Pelosi has maintained that any debt-ceiling vote should be paired with a new budget deal to lift federal spending caps enacted in 2011. The current budget agreement is also set to expire Oct. 1.

President Trump met Thursday in the Oval Office with chief of staff Mick Mulvaney, acting budget chief Russ Vought and legislative affairs chief Eric Ueland to discuss the negotiations, said a person familiar with the White House efforts.

The White House has asked federal agencies to provide updated shutdown contingency plans by early next month, the person said, describing that request as standard practice.

Exactly when the government will hit the debt limit depends on the pace of revenue collection and spending over the next two months, which can be difficult to project.

Corporate tax revenue had been particularly weak through much of the fiscal year but bounced back in June, a month with significant estimated tax payments, the Treasury said Thursday. Overall, revenue collection increased 3% so far this fiscal year, while outlays have risen 7%, amid higher spending on the military and interest payments on the debt.

Mnuchin’s excuse for delaying the Harriet Tubman $20 bill is insulting

It is more likely that Mr. Mnuchin, as the New York Times reported, feared President Trump would cause an uproar with an outright cancellation of a bill bearing Tubman’s image. As a candidate, Mr. Trump criticized the decision as “political correctness,” and he has made no secret of his admiration for President Andrew Jackson, whose image Tubman would have dislodged from the front of the $20 bill.

Some would argue there are bigger issues facing the country than who is on the $20 bill, and no doubt the administration is guilty of far more serious offenses. But symbols matter. Backpedaling on putting the first African American woman on paper money tells women and girls and people of color that they don’t — and never have — mattered. Mr. Trump has found yet another way to show that he does not really aspire to be president of all Americans.

Confidential draft IRS memo says tax returns must be given to Congress unless president invokes executive privilege

A confidential Internal Revenue Service legal memo says tax returns must be given to Congress unless the president takes the rare step of asserting executive privilege, according to a copy of the memo obtained by The Washington Post.

The memo contradicts the Trump administration’s justification for denying lawmakers’ request for President Trump’s tax returns, exposing fissures in the executive branch.

Trump has refused to turn over his tax returns but has not invoked executive privilege. Treasury Secretary Steven Mnuchin has instead denied the returns by arguing there is no legislative purpose for demanding them.

But according to the IRS memo, which has not been previously reported, the disclosure of tax returns to the committee “is mandatory, requiring the Secretary to disclose returns, and return information, requested by the tax-writing Chairs.”

The 10-page document says the law “does not allow the Secretary to exercise discretion in disclosing the information provided the statutory conditions are met” and directly rejects the reason Mnuchin has cited for withholding the information.

“[T]he Secretary’s obligation to disclose return and return information would not be affected by the failure of a tax writing committee . . . to state a reason for the request,” it says. It adds that the “only basis the agency’s refusal to comply with a committee’s subpoena would be the invocation of the doctrine of executive privilege.”

The memo is the first sign of potential dissent within the administration over its approach to the tax returns issue. The IRS said the memo, titled “Congressional Access to Returns and Return Information,” was a draft document written by a lawyer in the Office of Chief Counsel and did not represent the agency’s “official position.” The memo is stamped “DRAFT,” it is not signed, and it does not reference Trump.

The agency says the memo was prepared in the fall. At the time, Democrats were making clear they probably would seek copies of Trump’s tax returns under a 1924 law that states that the treasury secretary “shall furnish” tax returns to Congress.

Precisely who wrote the memo and reviewed it could not be learned. The agency says IRS Commissioner Charles Rettig and current chief counsel Michael Desmond, who was confirmed by the Senate in February, were not familiar with it until a Post inquiry this week. The IRS says it was never forwarded to Treasury.

Executive privilege is generally defined as the president’s ability to deny requests for information about internal administration talks and deliberations.

On Friday, Mnuchin rejected a subpoena from the House Ways and Means Committee to turn over the tax returns, a move that probably will now lead to a court battle. Mnuchin has criticized the demands as harassment that could be directed against any political enemy, arguing Congress lacks a “legitimate legislative purpose” in seeking the documents.

Breaking with precedent, Trump has refused to provide tax returns, saying without evidence they are under audit.

Mnuchin and other senior staff members never reviewed the IRS memo, according to a Treasury spokesman. But the spokesman said it did not undermine the department’s argument that handing over the president’s tax returns would run afoul of the Constitution’s mandate that information given to Congress must pertain to legislative issues.

The spokesman said the secretary is following a legal analysis from the Justice Department that he “may not produce the requested private tax return information.” Both agencies have denied requests for copies of the Justice Department’s advice to Treasury.

Some legal experts said the memo provides further evidence that the Trump administration is using shaky legal foundations to withhold the tax returns.

“The memo is clear in its interpretation of the law that the IRS shall furnish this information,” said William Lowrance, who served for about two decades as an attorney in the IRS chief counsel’s office and reviewed the memo at the request of The Post.

Daniel Hemel, a professor at the University of Chicago Law School who also reviewed the memo for The Post, said the document suggests a split over Trump’s returns between career staffers at the IRS and political appointees at that agency and the Treasury Department.

“The memo writer’s interpretation is that the IRS has no wiggle room on this,” Hemel said. “Mnuchin is saying the House Ways and Means Committee has not asserted a legitimate legislative purpose. The memo says they don’t have to assert a legitimate legislative purpose — or any purpose at all.”

The administration has resisted a range of House inquiries, although a federal judge on Monday ruled the president’s accounting firm must turn over his financial records to Congress.

Treasury Department officials said there had been extensive discussions about the tax return issue, with one official saying the issue put the agency in a difficult spot because Trump has predetermined the outcome — and because Mnuchin is a Trump ally who was the finance chair of his 2016 campaign.

The decision has been made,” this official said, who spoke on the condition of anonymity to discuss private conversations. “Now it’s up to us to try to justify it.”

Trump has told advisers he will battle the issue to the Supreme Court, according to people familiar with the matter. Trump recently has argued that the tax returns were an issue in the 2016 election but that because he won they should no longer be of concern.

Last week, Mnuchin told a Senate panel that Treasury Department lawyers held an early discussion about disclosing the tax returns long before Democrats officially demanded the documents in April. He did not reveal details of that deliberation or say what, if any, legal memos he had reviewed.

Some legal experts have held that the law is clear in giving Congress the power to compel the provision of the returns. But other former government lawyers, including two who served in the Reagan and George H.W. Bush administrations, have argued that the law is unconstitutional and could lead to widespread abuses of taxpayer privacy for political aims.

The IRS memo describes how and why Congress has the authority to access tax returns, explaining the origin of the provision and how it has been interpreted over the decades.

It highlights the special powers given to three committees for compelling the release of tax returns: the House Ways and Means Committee, the Senate Finance Committee, and the Joint Committee on Taxation. Other congressional committees, the memo emphasizes, do not have the same authority.

When it comes to the Ways and Means Committee, the obligation to divulge the returns “would not be affected by the failure” to give a reason for the request. By contrast, other committees “must include a purpose for their request for returns and return information when seeking access,” the memo states.

“One potential basis” for refusing the returns, the memo states, would be if the administration invoked the doctrine of executive privilege.

But the IRS memo notes that executive privilege is most often invoked to protect information, such as opinions and recommendations, submitted as part of formulating policies and decisions. It even says the law “might be read to preclude a claim of executive privilege,” meaning the law could be interpreted as saying executive privilege cannot be invoked to deny a subpoena.

Earlier this month, the nonpartisan Congressional Research Service published a review of Section 6103 of the Internal Revenue Code that found the code “evinces no substantive limitations” on the Ways and Means Committee’s authority to receive the tax returns.

But, the CRS report added, the committee’s authority “arguably is subject to the same legal limitations that generally attach to Congress’ use of other compulsory investigative tools,” including the need to serve some “legislative purpose” and not breach constitutional rights.

As China Talks Begin, Trump’s Trade Negotiator Tries to Keep President From Wavering

WASHINGTON — In the middle of his crowded dinner in Buenos Aires with President Xi Jinping of China, President Trump leaned across the table, pointed to Robert Lighthizer, the United States trade representative whose skepticism of China runs deep, and declared, “That’s my negotiator!

He then turned to Peter Navarro, his even more hawkish trade adviser, adding, “And that’s my tough guy!” according to aides with knowledge of the exchange.

Now, with talks between China and the United States set to begin this week in Beijing, Mr. Lighthizer, aided by Mr. Navarro, faces the assignment of a lifetime: redefining the trade relationship between the world’s two largest economies by Mr. Trump’s March 2 deadline to reach an agreement.

And he must do it in a way that tilts the balance of power toward the United States. His approach will have significant ramifications for American companies, workers and consumers whose fortunes, whether Mr. Trump likes it or not, are increasingly tied to China.

First, however, Mr. Lighthizer will need to keep a mercurial president from wavering in the face of queasy financial markets, which have suffered their steepest annual decline since 2008. Despite his declaration that trade wars are “easy to win” and his recent boast that he is a “Tariff Man,” Mr. Trump is increasingly eager to reach a deal that will help calm the markets, which he views as a political electrocardiogram of his presidency.

Mr. Trump has repeatedly told his advisers that Mr. Xi is someone with whom he can cut a big deal, according to people who have spoken with the president. On Saturday, Mr. Trump called Mr. Xi to discuss the status of talks, tweeting afterward that good progress was being made. “Deal is moving along very well,” Mr. Trump said.

The administration has tried to force China to change its ways with stiff tariffs on $250 billion worth of Chinese products, restrictions on Chinese investment in the United States and threats of additional levies on another $267 billion worth of goods. China has responded with its own tit-for-tat tariffs on American goods. But over a steak dinner during the Group of 20 summit meeting in Argentina, Mr. Xi and Mr. Trump agreed to a 90-day truce and to work toward an agreement that Mr. Trump said could lead to “one of the largest deals ever made.”

Mr. Lighthizer — whose top deputy will meet with Chinese officials this week ahead of more high-level talks in February — has played down any differences with Mr. Trump and views his role as ultimately executing the directive of his boss. But the trade representative, who declined to be interviewed, has told friends and associates that he is intent on preventing the president from being talked into accepting “empty promises” like temporary increases in soybean or beef purchases.

Mr. Lighthizer, 71, is pushing for substantive changes, such as forcing China to end its practice of requiring American companies to hand over valuable technology as a condition of doing business there. But after 40 years of dealing with China and watching it dangle promises that do not materialize, Mr. Lighthizer remains deeply skeptical of Beijing and has warned Mr. Trump that the United States may need to exert more pressure through additional tariffs in order to win true concessions.

When Mr. Lighthizer senses that anyone — even Mr. Trump — might be going a little soft on China, he opens a paper-clipped manila folder he totes around and brandishes a single-page, easy-reading chart that lists decades of failed trade negotiations with Beijing, according to administration officials.

Bob’s attitude toward China is very simple. He wants them to surrender,” said William A. Reinsch, a former federal trade official who met him three decades ago when Mr. Lighthizer was a young aide for former Senator Bob Dole of Kansas. “His negotiating strategy is simple too. He basically gives them a list of things he wants them to do and says, ‘Fix it now.’

Mr. Trump’s selection of Mr. Lighthizer last month to lead the talks initially spooked markets, which viewed the China skeptic’s appointment as an ominous sign. It also annoyed Chinese officials, who had been talking with the Treasury secretary, Steven Mnuchin, a more moderate voice on trade and the primary point of contact for Liu He, China’s top trade negotiator. Mr. Mnuchin has urged the president to avoid a protracted trade war, even if that entails reaching an interim agreement that leaves some issues unresolved.

Mr. Mnuchin, who attended the G-20 dinner, helped Mr. Trump craft an upbeat assessment declaring the Buenos Aires meeting “highly successful” in the presidential limousine back to the airport, according to a senior administration official.

The disparate views among Mr. Trump’s top trade advisers have prompted sparring — both publicly and behind the scenes.

During an Oval Office meeting with the trade team the fall of 2017, Mr. Lighthizer accused Mr. Mnuchin and Gary D. Cohn, the former National Economic Council director, of bad-mouthing him to free-trade Republican senators.

The argument grew so heated that the White House chief of staff, John F. Kelly, quickly pulled the combatants into the nearby Roosevelt Room and away from the president, where the argument raged on for a few more minutes, according to two witnesses.

Emily Davis, a spokeswoman for the United States trade representative, disputed the account.

Mr. Lighthizer has since worked to increase his own face time with Mr. Trump. He has joked to colleagues that he has more influence with Mr. Trump during winter months because he is able to hitch a ride on Air Force One during the president’s flights down to Mar-a-Lago, which is several miles from Mr. Lighthizer’s own $2.3 million waterfront condo in Palm Beach, Fla.

He used that access to argue to Mr. Trump that the United States has never had more leverage to extract structural reforms on intellectual property, forced transfer of technology from American companies and cybercrime. But while Mr. Trump has jumped at the chance to claim victory in changing China’s ways, experts say that what Mr. Lighthizer is demanding would require significant shifts in how Beijing’s central government and its manufacturing sector coordinate their activities, and that might simply not be possible in the short term.

“Good luck with that,” Mr. Scissors said.

Those who know Mr. Lighthizer say he will try to force concessions through a combination of pressure tactics, like tariffs, and public condemnation. Mr. Lighthizer — who described his own negotiating style as “knowing where the leverage is” during a 1984 interview — typically presents few specific demands during initial talks while publicly bashing efforts by the other side.

He used that approach during recent talks with Canada and Mexico to revise the North American Free Trade Agreement, criticizing foreign counterparts as intransigent and characterizing complaints by American businesses as pure greed.

Mr. Lighthizer’s unsparing view of China comes, in part, from his childhood in Ashtabula, Ohio, an industrial and shipping town on the Great Lakes hit by the offshoring of steel and chemical production. For much of his career, Mr. Lighthizer was a lonely protectionist voice in a Republican Party dominated by free traders, alternating between jobs in government and a lucrative private law career representing large American corporations like United States Steel in trade cases against China.

Mr. Lighthizer found his way into Mr. Trump’s orbit through his work in the steel industry, where he gained prominence by filing lawsuits accusing Japan and China of dumping metals into the United States, in violation of trade laws. In 2011, Mr. Lighthizer caught Mr. Trump’s eye with an opinion piece in The Washington Times, in which he defended Mr. Trump’s approach to China as consistent with conservative ideology and compared the future president to Republican icons like Ronald Reagan.

Taciturn in public and self-deprecating in private, Mr. Lighthizer sees himself as a serious player on the world stage: Two recent guests to Mr. Lighthizer’s Georgetown townhouse were greeted by the stern visage of their host staring down at them from an oil portrait on the wall.

The trade adviser is guarded around Mr. Trump, often waiting until the end of meetings to make his points and quietly nudging the president away from actions he views as counterproductive, current and former officials said. That was the case in mid-2017 when he cautioned the president against withdrawing unilaterally from the World Trade Organization, adding for emphasis, “And I hate the W.T.O. as much as anybody.”

He does not always get his way. In the wake of a new trade agreement with Mexico and Canada this fall, Mr. Lighthizer urged Mr. Trump to consider easing steel and aluminum tariffs on those countries and replacing them with less burdensome quotas. Mr. Trump rejected his plan, according to negotiators from all three countries.

A poker-faced Mr. Lighthizer broke the news to his Mexican and Canadian counterparts by declaring the proposal was inoperative, one of the officials said.

The president also ignored Mr. Lighthizer’s advice in early December when he announced that he intended to begin the six-month process of withdrawing the United States from Nafta in order to pressure House Democrats into passing the new United States-Mexico-Canada Agreement.

That threat undermined months of quiet negotiations between Mr. Lighthizer, labor groups and Democrats like Senator Sherrod Brown of Ohio and Representative Nancy Pelosi of California to try to win their support for the new trade deal. Mr. Trump has yet to follow through on his threat, and Mr. Lighthizer continues trying to work with Democrats to get the new trade deal approved.

Bob is trying to provide stability and focus in a completely chaotic environment,” Mr. Brown said. “I can’t speak for Bob, but I am certain he is frustrated. How could you not be frustrated as the U.S. trade representative for a president who knows what his gut thinks but hasn’t put much of his brains into trade?