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Washington

Trump sides with Democrats on interim debt-limit fix, Harvey aid

President Donald Trump

President Donald Trump sided with Democrats on adding a three-month extension of the U.S. debt limit and government spending to a hurricane-relief bill over the arguments of fellow Republicans, who pressed for a longer debt extension.

Mr. Trump, after meeting with congressional leaders Wednesday at the White House, told reporters on Air Force One that the deal with Democrats would be "very good."

"We agreed to a three-month extension on debt ceiling, which they consider to be sacred — very important — always we'll agree on debt ceiling automatically because of the importance of it," the president said.

Senate Majority Leader Mitch McConnell told reporters he'll add the spending and debt-limit extensions to the Hurricane Harvey relief package passed by the House earlier in the day. He said he will support the measure.

"The president agreed with Senator Schumer and Congresswoman Pelosi to do a three-month CR and debt ceiling until December," said Mr. McConnell, a Kentucky Republican. "His feeling was that we needed to come together to not create a picture of divisiveness at a time of genuine national crisis." CR is shorthand for a stopgap government spending bill.

Just hours earlier, House Speaker Paul Ryan of Wisconsin — who was in the meeting with Mr. Trump — had told reporters the Democratic proposal was "unworkable" and "ridiculous."

The agreement sets up what could be a major fight in December over government funding, Mr. Trump's proposed border wall with Mexico and Mr. Trump's decision to end a program that lets young undocumented immigrants stay in the U.S., as well as perhaps the debt ceiling.

The plan would extend the U.S. debt limit and provide funds to keep the government running through Dec. 15, Senate Democratic leader Chuck Schumer of New York and House Democratic leader Nancy Pelosi of California said in a joint statement.

While rates on Treasury bills maturing around the previous late-September debt-limit deadline outlined by Treasury Secretary Steven Mnuchin plunged, they surged on securities coming due around mid-December, suggesting Wall Street sees more legislative strife ahead. The yield on Treasury bills maturing Dec. 14 rose by about 8 basis points, to 1.046%.

"Both sides have every intention of avoiding default in December and look forward to working together on the many issues before us," Mr. Schumer and Ms. Pelosi said in their statement.

Later, Mr. Schumer told reporters, "We thought for the good of the country we should make the right offer and we did, and we're very glad the president accepted it."

Conservative groups criticized the deal, saying it weakens the hands of Republicans by giving Democrats more power over a spending bill at the end of the year. Creating a fiscal and debt deadline just before the holidays pressures lawmakers to vote for a deal to get home to their families, they said.

But White House legislative affairs chief Marc Short told reporters on Air Force One that "clearing the decks" will allow lawmakers to focus on a GOP priority: overhauling the tax code.

Messrs. McConnell, Ryan and Mnuchin pushed during the meeting for a longer-term debt-limit deal, according to several people with knowledge of the discussion. They cited a variety of reasons, including market reactions and the idea Democrats were using the short-term offer to try to get more policy concessions, but Mr. Trump said he wanted a deal, one person said.

A three-month debt-limit deal was the last thing Mr. Mnuchin wanted, an administration official said. Mr. Mnuchin has said Congress needs to raise the debt ceiling by Sept. 29.

Other people familiar with the meeting said Mr. Trump and congressional leaders had a prolonged discussion on how long to extend the debt limit, and after Democrats rejected GOP leaders' proposed 18-month and six-month extensions, eventually the president said he agreed with Democrats on a three-month plan. At that point, Mr. McConnell stepped in to say a short-term government spending bill should also be added, one person said.

Senate Republican leaders had planned to use the measure to suspend the debt ceiling past the November 2018 congressional elections, but Mr. Trump's move upended their strategy.

"The Pelosi-Schumer-Trump deal is bad," Republican Sen. Ben Sasse of Nebraska said in a statement.

The House passed $7.4 billion for a federal disaster-relief fund Wednesday, two days before it's set to run out. The measure, passed 419-3, is designed to provide relief to tens of thousands of homeowners from flooding caused by Hurricane Harvey in Texas and other parts of the Gulf Coast.

The House bill meets a White House request for $7.4 billion in disaster funds for the Federal Emergency Management Agency and $450 million in funding for the Small Business Administration. Additional FEMA funding is to be provided later, according to House aides.

Some conservative groups, such as Heritage Action, support this disaster aid without spending offsets. That may help Mr. Ryan gain votes of conservative lawmakers when the legislation comes back from the Senate. Still, conservative groups like the Club for Growth oppose the initial package because it would add to the deficit. Both groups oppose linking the debt ceiling to disaster funds.

Republican Mark Meadows of North Carolina, chairman of the conservative House Freedom Caucus, said Mr. Trump "wasn't left with a lot of good options."

"Democrats got exactly what they wanted, is for a three-month CR and a three-month debt ceiling to come due a few days before Christmas, which gives them the greatest leverage in the world to get exactly what they want later," Mr. Meadows said.