Trump made a critical decision in the upcoming debt ceiling fight

Reuters

U.S. President Donald Trump arrives for a signing ceremony with Treasury Secretary Steve Mnuchin at the Treasury Department in Washington, U.S., April 21, 2017.

President Donald Trump told Republican congressional leaders on Tuesday that Treasury Secretary Steven Mnuchin will lead the negotiations on the debt ceiling, indicating a key part of the administration’s stance on the battle to come.

According to Ben White, Burgess Everett, and John Bresnahan at Politico, Trump told GOP leaders from both chambers of Congress in a meeting at the White House that “Mnuchin is that guy” for the debt ceiling negotiations.

Mnuchin favors a “clean” hike to the debt ceiling. Mick Mulvaney, the director of the Office of Management of Budget, has on the other hand said he favored a hike with stipulations that could make it politically difficult to pass.

The diverging positions led to a confusing situation in which lawmakers were unsure who was speaking for the White House. It was further complicated when National Economic Council director and key adviser Gary Cohn told CNBC that the administration was open to adding riders to the debt-ceiling legislation.

“In a perfect world you would love to have a clean debt ceiling,” Cohn added. “But if we need to get things attached to get it through, we’ll attach things.”

Mulvaney, a deficit hawk going back to his days as a congressional member of the hardline conservative House Freedom Caucus, told the Washington Examiner that spending cuts and deficit-reduction measures would be part of the ask for the debt-ceiling bill.

Such additions would placate conservatives like the Freedom Caucus but would make the bill toxic for Democrats and leave a narrower potential path for the bill to advance through Congress.

If the debt ceiling is not raised, the implications for the global economy would be devastating. The debt ceiling fight in 2011, which barely avoided breaching the limit, resulted in a stock market correction and the first-ever downgrade of the US’s credit rating.