Feb 17, 2019

Axios Sneak Peek

By Jonathan Swan
Jonathan Swan

Welcome to Sneak Peek, our weekly lookahead for both ends of Pennsylvania Avenue, plus my best scoops. Please encourage your friends and colleagues to sign up.

  • Secure tips: Reply to this email to get my number to text and talk via the Signal app.
  • Alternately, you can email my Protonmail account: jonathanvswan@protonmail.com. You should use your own Protonmail account for end-to-end encryption. These accounts are free and easy to set up.
1 big thing: Trump's go-it-alone presidency

Illustration: Lazaro Gamio/Axios

Shortly after becoming President Trump's acting chief of staff, Mick Mulvaney conveyed a blunt message to several Cabinet secretaries. According to a senior White House official with direct knowledge and another source briefed on the private conversations, Mulvaney told the Cabinet officials that their "highest priority" over the next year would be deregulation.

  • "We knew there was one thing we could do without legislation," the senior official told me.
  • When Mulvaney sits down with the president to discuss the Cabinet secretaries' performance, the official said, "Dereg is going to be top of the list."

Why it matters: Trump relishes using the power of the presidency to do whatever he can without Congress.

  • Trump made his most dramatic use of executive power on Friday by declaring a national emergency so he could circumvent Congress and spend billions of dollars for his wall.

This is the latest piece of a trend that may define the modern American presidency. Obama used executive power without apology when Congress blocked his agenda in the latter years of his presidency. And George W. Bush enthusiastically pushed the boundaries of presidential power.

  • Trump has looked for creative ways to use executive power to advance his agenda. His shock-and-awe series of executive orders early in his presidency resulted in protracted court battles, some of which he won.
  • His agencies are sweeping away regulations, including the most aggressive gutting of environmental regulations since at least President Reagan, and maybe ever. 

Behind the scenes: More than half a dozen current and former White House officials told me that after they passed their big tax bill last Congress, a broad consensus emerged: Trump wouldn't get anything else big through Congress before his re-election.

  • Trump appears to share that view. Since the tax bill's passage, he has focused on issues where Congress has little power, including foreign policy and trade.
  • While Congress can block his trade deal with Canada and Mexico, the Trump administration has made clear they won't need the Hill’s signoff for the China talks. But there's a trade-off for his legacy: The next president will be able to unilaterally undo any China agreement — just like Trump reversed Obama's Iran deal.

The bottom line: This concentration of power in the executive branch is part of the reason Republicans have invested so much in confirming new judges. In a world of government by executive order, Congress loses its relevance and judges become the surest check on an overreaching executive.

Go deeper: Read this deeply reported 2016 New York Times story on Obama's embrace of executive power.

2. Governing on the edge

Illustration: Lazaro Gamio/Axios

A senior government official who was involved in the spending negotiations over the past few weeks told me the experience taught them something disturbing.

  • "We're going to go to the edge on everything," the official said on Friday, shortly after Trump signed the bill to fund the 25% of the government that had shut down for 35 days on his watch.

Why it matters: The White House has just gotten through a spending fight that pushed Congress — and the federal workforce affected by the shutdown — to the brink. But even uglier skirmishes are imminent, including whether to raise the federal government's debt limit and break Congress' self-imposed budget caps.

What's next? In a phone conversation this morning, I asked a senior White House official if he thought the shutdown had any benefit for the Trump administration.

  • "I think it's absolutely been effective, because the president is winning the message on border security," the senior official said.
  • Trump "was able to use that 35-day period to highlight that issue and all the polling data that we've got seems to indicate that while we did get blamed for a shutdown, the numbers moved dramatically in our favor on the issue of border security," the official said. "And that never would've happened if we'd signed the bill back in December."
  • (FYI: I'm not aware of public polling that shows a dramatic improvement for the president on border security; though the White House has mentioned private polling that shows numbers moving in their direction in key swing districts.)

I also asked the senior official if he would dispute that characterization that this administration will "go to the edge on everything" — especially on impending battles over 2020 spending levels and raising the debt limit.

  • "If you get the impression that it's going to be intentional, I think that's unfair," the official said. "If you think that's the practical outcome, that's probably accurate.
  • "If we know one thing about Congress, it waits to the very last minute to do everything anyway."
3. Behind the scenes: The debt ceiling looms

White House acting Chief of Staff Mick Mulvaney. Photo: Chip Somodevilla/Getty Images

Before a recent Cabinet meeting, Mulvaney and Treasury Secretary Steven Mnuchin chatted about the debt ceiling, per a senior White House official. According to that official and another source briefed on the chat, Mnuchin said, "Democrats will give us a clean debt ceiling."

  • Mulvaney "sort of giggled," according the senior official. "Steven, no they won't," he added.
  • Mnuchin said Democrats wanted a clean hike last time; Mulvaney retorted that Democrats weren't in charge then.
  • "Now they're going to end up tying one of their priorities to the debt ceiling increase," Mulvaney predicted to Mnuchin, according to the official. "You cannot assume that because they wanted something the last time, it's exactly the same thing they want this time. ... There's not much consistency when it comes to this in politics."
  • A source familiar with Mnuchin's thinking told me, "The secretary is focused on raising the debt ceiling, but hasn't expressed a strong preference for how it's done. That's up to Congress."

Between the lines: The next trillion-dollar fight concerns the debt ceiling. Global markets freak out any time members of Congress or White House officials float anything other than a drama-free debt-ceiling hike.

  • As a House conservative, Mulvaney pushed to use the debt ceiling as a lever to cut spending. And as Trump's budget director, he favored the concept of "debt prioritization" — an idea that thrills some in the conservative movement but horrifies the markets, the Treasury secretary and the leadership of both parties.
  • It seems unlikely, though, that Mulvaney will put much effort into advocating for debt prioritization in his current role as chief of staff. He's told colleagues he thinks the administration will get more leverage out of the threat of spending cuts than it will by using the debt ceiling.
  • The Trump administration is so internally divided over the debt ceiling that many in Congress wouldn't believe the White House if they threatened to hold it hostage.

So what's debt prioritization? Before the Tea Party, Congress routinely raised the debt ceiling (the limit on how much the Treasury can borrow) with every annual budget. But after 2010, House conservatives argued that this shouldn't happen without concessions to the right, such as cuts in how much the government spends. To make that happen, they advocated for debt prioritization, the idea that the U.S. government could pay creditors on time (e.g., interest on the national debt) but delay paying other bills. It's a type of brinkmanship.

  • Last February, Trump signed a bill suspending the debt ceiling until March 1, 2019. As soon as this week, the Treasury Department is expected to start issuing guidance for "extraordinary measures" — a term of art to describe actions the Treasury secretary can take to delay the U.S. government from defaulting on its debts.
  • Experts who monitor this issue say they think Mnuchin will probably be able to use extraordinary measures to delay a debt crisis until at least late summer, giving Congress about six extra months to deliberate.

Behind the scenes: Mnuchin is expected to make it clear — as he did the last time the Trump administration bumped into the debt ceiling — that he won't mess around with the full faith and credit of the U.S. government. He calmed markets last time by saying he wanted Congress to pass a clean debt ceiling increase and that he thought prioritizing debt payments "doesn't make much sense."

  • But a senior White House official told me that "elements within the administration," including Mulvaney, will be "encouraging the president to consider the possibility of prioritization of payments."
  • "We will certainly raise, for the president, the options that we have going into the next round of negotiations. Certainly the debt ceiling will be part of that."
4. What's next: A bigger spending battle

Photo: Andrew Harrer/Bloomberg/Getty Images

Last week, some senior members of the White House staff had a conversation about leverage. Specifically, what leverage they might have for the congressional fights ahead. According to a senior official familiar with the conversation, Mulvaney told colleagues that part of the challenge the White House had in this most recent negotiation was they "didn't have much leverage."

  • Mulvaney told colleagues that "now we do" have leverage; and he said he viewed the threat of sequestration as a bigger source of leverage for the White House than any conversation about the debt ceiling, the official said.
  • Sequestration is the massive automatic budget cuts that will happen if Republicans and Democrats can't agree by Oct. 1 on next year's spending levels.

Between the lines: If Congress doesn't cut a 2020 spending deal by Oct. 1 then more than $70 billion will be automatically cut from the Pentagon's budget and more than $50 billion will be cut from non-defense spending. For the military, and many members of Congress and the people dependent on the affected government programs, that would be a crisis.

  • Trump wants $750 billion for the military in 2020 — a massive increase. To get that huge amount of money without breaking the mandatory spending limits, the White House supports the controversial idea of the Pentagon dramatically increasing a war fund called "Overseas Contingencies Operations (OCO), which critics describe as a "Pentagon slush fund."
  • "The big battle is going to be spending," a senior White House official told me. "The president is able to fund his priorities with the OCO budget. The Democrats, less so. So as we get into the next round, they [Democrats] need a spending caps increase more than we do."

Ironically, Mulvaney, who used to be a vocal opponent of the OCO slush fund, now supports the idea of using it to circumvent mandatory spending levels, according to a source who's discussed it with him.

  • I asked a senior White House official how it wasn't hypocritical for Mulvaney to now support dramatically increasing the OCO slush fund when he'd previously railed against its misuse when he was a fiscally conservative member of Congress.
  • "Yes," the official replied. "You can say that Mulvaney fully recognizes the inconsistencies between this and his previous arguments. There's no question about that."
5. Trump to put car tariffs in his back pocket

Photo: Chip Somodevilla/Getty Images

Today is the deadline for the Commerce Department to send the White House its auto tariffs report.

Why it matters: The report will recommend whether Trump should follow through on his threat to use a "national security" law to impose massive tariffs — Trump likes the round number of 25% — on imports of cars and car parts.

  • If Trump follows through on these tariffs, allies will go crazy, especially the Europeans, but also the Japanese and maybe the Koreans. (Canada and Mexico are largely protected by side letters in their new trade deal with the U.S.)
  • U.S. business leaders won't be happy with car tariffs, either, and there will almost certainly be a legal challenge to the notion that automobile imports constitute a national security threat.
  • The U.S. Chamber of Commerce's leader of international trade, John Murphy, tweeted this morning: "Reminder: The auto industry is united in opposition. Nearly all economists too. It's a terrible idea."

Behind the scenes: Most of Trump's senior economic advisers — with the notable exception of Peter Navarro — think imposing car tariffs is a terrible idea. But Trump tells everyone who'll listen that the threat of car tariffs is his best source of leverage in negotiations with foreign leaders.

  • Trump says privately he used them against Canadian Prime Minister Justin Trudeau, and he believes that by hanging the threat of car tariffs over the ongoing trade negotiations with the Europeans, the Trump administration will get a better deal.
  • Sources familiar with the White House's auto tariffs strategy tell me they plan to keep the contents of the Commerce report a secret, at least for the time being, as is their prerogative under the law. 

The bottom line: A senior Republican Senate aide familiar with the strategy described it this way: "Mostly that they don't want to make it public so that the president can keep it in his back pocket as a threat (no matter what it says about cars and national security)."

6. Sneak Peek diary

The House and Senate are on recess.

President Trump's schedule, per a White House official:

  • Monday: Trump will address the Venezuelan American community in Miami.
  • Tuesday: Trump has meetings with Secretary of State Mike Pompeo and Homeland Security Secretary Kirstjen Nielsen. He also has lunch with Mike Pence.
  • Wednesday: Trump will have lunch with Pompeo. He will also participate in an expanded bilateral meeting with Austrian Chancellor Sebastian Kurz.
  • Thursday: Trump will receive an intelligence briefing and he and the first lady will attend a reception for National African American History Month.
Jonathan Swan