Fed says risks to economy easing, but calls out coronavirus in report to Congress

By Howard Schneider and Lindsay Dunsmuir

WASHINGTON (Reuters) – A “moderately” expanding U.S. economy was slowed last year by a manufacturing slump and weak global growth, but key risks have receded and the likelihood of recession has declined, the U.S. Federal Reserve reported in its latest monetary policy report to the U.S. Congress.

“Downside risks to the U.S. outlook seem to have receded in the latter part of the year, as the conflicts over trade policy diminished somewhat, economic growth abroad showed signs of stabilizing, and financial conditions eased,” the Fed said, noting that the U.S. job market and consumer spending remained strong.

“The likelihood of a recession occurring over the next year has fallen noticeably in recent months.”

Among the risks the Fed did note: the fallout from the spreading outbreak of coronavirus in China, “elevated” asset values, and near-record levels of low-grade corporate debt that the Fed fears could become a problem in an economic downturn.

Overall, however, the Fed saw risks to a more than decade long U.S. recovery easing following its three interest rate cuts in 2019, and evidence that “the global slowdown in manufacturing and trade appears to be at an end, and consumer spending and services activity around the world continue to hold up.”

It cautioned that “the recent emergence of the coronavirus, however, could lead to disruptions in China that spill over to the rest of the global economy.”

By law the Fed twice a year prepares a formal report for the U.S. Congress on the state of the economy and monetary policy.

Much of its amounts to a review of recent events. The new document repeats the Fed’s assessment that the current level of the federal funds rate, in a range of between 1.5% and 1.75% was “appropriate” to keep the recovery track.

It also reviewed the spike in the federal funds rate last fall and the steps the Fed has taken to relieve funding pressures, repeating it considers the measures technical and not a change in monetary policy.

Fed Chair Jerome Powell will present the report at two public hearings next week, and some Democratic U.S. senators have already posed in writing a series of questions challenging the Fed’s actions in those short-term funding markets.

The document did include a separate section analyzing how a slump in manufacturing last year impacted economic growth overall, after concern a downturn in that sector might pull the United States into a recession.

The Fed concluded that the slowdown in factory output, which also meant less business for parts and services suppliers, cut overall growth in gross domestic product between 0.2 and 0.5 percentage points.

That falls “well short” of the threshold associated with past recessions, the Fed said.

(Reporting by Howard Schneider and Lindsay Dunsmuir; Editing by Andrea Ricci)

Suspend Hong Kong status in event of China crackdown: U.S. commission

By David Brunnstrom

WASHINGTON (Reuters) – The U.S. Congress should enact legislation that would suspend the special economic status Hong Kong enjoys under U.S. law should China deploy forces to crush protests in the territory, a congressional advisory body said on Thursday.

The U.S.-China Economic and Security Review Commission (USCC), which is tasked with monitoring the national security implications of U.S. relations with Beijing, issued the call in its annual report among a series of tough proposals reflecting a “markedly more confrontational” relationship.

It said that, with Beijing seeking to build a “world class” military and warning of its willingness to take military action to defend its interests, Washington “must plan for worst-case scenarios, while trying to achieve the best ones.”

A push in the U.S. Congress for legislation to support pro-democracy protests in Hong Kong and pressure China to refrain from a violent crackdown has faced obstacles, raising questions about whether it will ever become law.

The House of Representatives unanimously passed Hong Kong human rights legislation last month, including a bill that would place Hong Kong’s special treatment under tighter scrutiny.

A Senate committee approved a similar measure in September but it has yet to be scheduled for a vote by the full body and the White House has not said whether President Donald Trump would sign or veto such a bill.

The commission’s recommendations go further, calling for legislation to suspend Hong Kong’s special status if China “deploys People’s Liberation Army or People’s Armed Police forces to engage in armed intervention in Hong Kong.”

It also urged Congress to direct the State Department to develop specific benchmarks to measure the “high degree of autonomy” the territory is meant to enjoy from Beijing.

Two senior senators began a process on Thursday aimed at quickly passing the Senate bill, amid a surge in violence following months of protests in Hong Kong.

Jim Risch, the Republican chairman of the Senate Foreign Relations Committee, and Marco Rubio, another Republican who is a senior member of the panel, want to pass the bill by unanimous voice vote, but it remains unclear when that might happen.

On Taiwan, which Beijing views as a renegade province but which Washington is bound to help defend, the USCC called for a Pentagon study to form the basis of a 15-year plan of action to deter any attempt by Beijing to absorb the island by force.

It also called for legislation to direct the administration to increase military exchanges and training with Taiwan.

“Just as nations sought freedom from the iron grip of the Soviet system, we are bearing witness to aspirations in both Hong Kong and Taiwan which require our reconsideration of the commitments we made under the one-country, two-systems model,” USCC vice chair, Robin Cleveland, said in introducing the report.

The commission highlighted the deepening ties between China and Russia, and said Congress should seek an intelligence assessment of the effect this could have on the United States and its allies and on how to respond.

USCC recommendations are nonbinding but have become increasingly influential with policy makers. Its prescriptions are routinely denounced by Beijing. China’s Washington embassy did not immediately respond to a request for comment.

The report focused closely on Chinese leader Xi Jinping’s bid to tighten his and the Communist Party’s grip on power and argued he should be referred to as “general secretary” of that party, rather than by the “unearned title of ‘President.'”

The USCC said U.S.-China relations had deteriorated “significantly” in the past year, during which time both sides imposed retaliatory tariffs in a damaging trade war and Beijing stepped up efforts to promote itself as a global leader able to project military power beyond the Indo-Pacific, as well as into space.

(Reporting by David Brunnstrom; Addtional reporting by Patricia Zengerle; Editing by Paul Tait and Jonathan Oatis)

Trump impeachment effort passes first test in split U.S. Congress

Trump impeachment effort passes first test in split U.S. Congress
By Patricia Zengerle and Richard Cowan

WASHINGTON (Reuters) – A deeply divided U.S. House of Representatives took a major step in the effort to impeach President Donald Trump on Thursday when lawmakers approved rules for the next stage, including public hearings, in the Democratic-led inquiry into Trump’s attempt to have Ukraine investigate a domestic political rival.

In the first formal test of support for the impeachment investigation, the Democratic-controlled House voted almost entirely along party lines – 232 to 196 – to move the probe forward in Congress.

The vote demonstrated unity among Democrats who accuse Trump of abusing his office and jeopardizing national security for personal political gain. But they did not pick up a single Republican vote.

“It’s a sad day. No one comes to Congress to impeach a president,” House Speaker Nancy Pelosi said before the vote.

Televised public hearings featuring U.S. officials testifying in Congress about alleged wrongdoing by Trump could crowd out other issues like the economy and immigration as voters turn their minds to the November 2020 presidential election.

That might damage Trump but some of his supporters say the impeachment drive could actually boost his re-election chances by showing him at loggerheads with Washington-based political foes.

Republicans accused Democrats of using impeachment to overturn the results of his 2016 victory.

“The Greatest Witch Hunt In American History!” Trump wrote on Twitter after the vote.

The probe focuses on a July 25 telephone call in which Trump asked his Ukrainian counterpart, Volodymr Zelenskiy, to investigate Trump’s Democratic political rival Joe Biden, a former U.S. vice president, and his son Hunter, who had served as a director for Ukrainian energy company Burisma.

Biden is a leading candidate in the Democratic presidential nomination race to face Trump in the November 2020 election. He and his son have denied any wrongdoing.

Trump has also denied wrongdoing. Republicans have largely stuck by him, blasting the effort as a partisan exercise that has given them little input.

REPUBLICAN PUSHBACK

“The country next year will be deciding who our president is going to be. It should not be Nancy Pelosi and a small group of people that she selects that get to determine who is going to be our president,” said Kevin McCarthy, the top House Republican.

Just two Democrats – Collin Peterson of Minnesota and Jeff Van Drew of New Jersey – voted against the measure. Both represent districts where Trump won in the 2016 election. Other Democrats from Trump-leaning districts, such as Jared Golden of Maine, voted yes.

If the House eventually votes to impeach Trump, that would set up a trial in the Republican-controlled Senate. Trump would not be removed from office unless votes to convict him by a two-thirds margin, something that looks unlikely as congressional Republicans have been reluctant to move against the president.

House Judiciary Chairman Jerrold Nadler declined say when public hearings would start but they are expected to begin in the next few weeks.

The U.S. Constitution gives the House broad authority to set ground rules for an impeachment inquiry and Democrats say they are following House rules on investigations. They have promised to hold public hearings on the case against Trump.

Lawmakers leading the inquiry heard closed-door testimony from Tim Morrison, the top Russia specialist on Trump’s National Security Council. Morrison resigned from his position on Wednesday, a senior administration official said.

Members of the three committees conducting the investigation expect Morrison to fill in more of the details about Trump’s dealings with Ukraine. Morrison listened in on the July 25 phone call and said the call “could have been better,” according to acting U.S. Ambassador to Ukraine Bill Taylor.

Committee members have asked a far more prominent player, former national security adviser John Bolton, to appear next week. Others have testified that Bolton was alarmed by a White House effort to pressure Zelenskiy. Bolton’s lawyer has said he was not willing to testify unless a subpoena is issued.

(Additional reporting by Doina Chiacu and Daphne Psaledakis; Writing by Daniel Wallis; Editing by Andy Sullivan and Alistair Bell)

Trump says Congress would act if top court rejects ‘Dreamers’

By Susan Heavey and Lawrence Hurley

WASHINGTON (Reuters) – President Donald Trump on Wednesday said the U.S. Congress could step in to protect the immigrants known as “Dreamers” if the Supreme Court endorses his plan to end a program protecting hundreds of thousands of these young adults who were brought into the country illegally as children.

“Republicans and Democrats will have a deal to let them stay in our country, in very short order,” Trump wrote on Twitter.

The Supreme Court is set to hear arguments on Nov. 12 over Trump’s 2017 plan to rescind the Deferred Action for Childhood Arrivals (DACA) program created by his Democratic predecessor Barack Obama in 2012. The immigrants protected under the program often are called “Dreamers.”

Trump and Congress have been unable to agree on legislation that would protect the “Dreamers,” with deep differences between the president’s fellow Republicans and Democratic lawmakers. The failure of Congress to pass a bipartisan immigration package is what prompted Obama to create DACA.

The DACA program currently shields about 700,000 immigrants, mostly Hispanic young adults, from deportation and provides them work permits, though not a path to citizenship.

Trump’s move to rescind DACA was blocked by lower courts.

A ruling by the Supreme Court is due by the end of June.

Trump said on Twitter that if the Supreme Court upholds DACA – which is not the legal question in the case before the justices – it would give the president “extraordinary powers.”

The Trump administration has argued that Obama exceeded his constitutional powers when he bypassed Congress and created DACA.

Trump himself has sought to exercise broad presidential powers over immigration, including his travel ban on people entering the United States from several Muslim-majority countries. The Supreme Court upheld that policy in 2018, recognizing wide presidential authority in this area. Trump bypassed Congress in imposing the travel ban.

The legal question before the Supreme Court is whether Trump’s administration properly followed a federal law called the Administrative Procedure Act in the president’s plan to end DACA. The Supreme Court does not have to decide whether the DACA program itself was lawful.

(Reporting by Susan Heavey; Additional reporting by Lawrence Hurley; Editing by Alison Williams and Will Dunham)

U.S. Congress to advance ‘Hong Kong Human Rights and Democracy’ bill

By Patricia Zengerle

WASHINGTON (Reuters) – U.S. congressional committees are due to start voting next week on legislation supporting human rights in Hong Kong, with measures under consideration including annual reviews of the Chinese territory’s special economic status and the imposition of sanctions on those who undermine its autonomy.

House of Representatives Speaker Nancy Pelosi held a news conference on Wednesday with House members – Republicans and her fellow Democrats – as well as Joshua Wong, Denise Ho and other Hong Kong democracy activists to back the “Hong Kong Human Rights and Democracy Act of 2019.”

The activists have spent much of this week in Washington making their case for U.S. support, including testifying at a congressional hearing on Tuesday.

“Democrats and Republicans in the House and the Senate enthusiastically support this legislation,” Pelosi said. “We stand with … all who are fighting for a peaceful, hopeful future.”

Leaders of the House Foreign Affairs Committee said the committee was due to mark up – debate and vote on – the bill next week. It is expected to pass, which would send it for a vote by the full House.

A spokeswoman for the Senate Foreign Relations Committee said that committee was also working on its version of the legislation, hoping to hold its markup next week.

The bill’s text will not be final until it passes both houses of Congress, and it must be signed by President Donald Trump to become law.

The current version of the House bill calls for annual evaluations of whether Hong Kong still meets the conditions – including remaining autonomous – of the 1992 U.S. law granting it special economic status.

It also would require the Trump administration to identify and sanction anyone responsible for human rights abuses in Hong Kong, Republican Representative Chris Smith, one of the bill’s lead sponsors, told the news conference.

Trump has sent some mixed signals on the Hong Kong protests. In early August, he caused alarm among those sympathetic to the movement by describing the street demonstrations as riots.

Trump has since called on China to end the discord in a humanitarian way and said a crackdown could make his efforts to end a damaging trade war “very hard.”

Some industry groups worry that the legislation could threat then delicate trade talks. Backers rejected that concern.

“We cannot let commercial interests drive our policy,” Pelosi said.

(Reporting by Patricia Zengerle; Editing by Tom Brown)

Israel bars visit by U.S. Democratic lawmakers

FILE PHOTO: Rep. Ilhan Omar (D-MN) holds a news conference to discuss legislation creating "a federal grant program to help local governments invest in waste reduction initiatives", at the U.S. Capitol in Washington, U.S., July 25, 2019. REUTERS/Mary F. Calvert/File Photo

By Rami Ayyub and Jeffrey Heller

JERUSALEM/WASHINGTON (Reuters) – Israel will bar a visit by two of its sharpest critics in the U.S. Congress, Democrats Rashida Tlaib and Ilhan Omar, who planned to tour the occupied West Bank and East Jerusalem, the country’s deputy foreign minister said on Thursday.

“The decision has been made, the decision is not to allow them to enter,” Israeli Deputy Foreign Minister Tzipi Hotovely told Israel’s Reshet Bet Radio.

U.S. President Donald Trump had earlier urged Israel on Thursday not to allow the visit by Tlaib and Omar, the first two Muslim women elected to Congress and members of the Democratic party’s progressive wing.

FILE PHOTO: Rep. Rashida Tlaib (D-MI) questions Acting Homeland Security Secretary Kevin McAleenan as he testifies before the House Oversight and Reform Committee on "Trump Administration's Child Separation Policy" on Capitol Hill in Washington, U.S., July 18, 2019. REUTERS/Joshua Roberts/File Photo

FILE PHOTO: Rep. Rashida Tlaib (D-MI) questions Acting Homeland Security Secretary Kevin McAleenan as he testifies before the House Oversight and Reform Committee on “Trump Administration’s Child Separation Policy” on Capitol Hill in Washington, U.S., July 18, 2019. REUTERS/Joshua Roberts/File Photo

The pair have voiced support for the pro-Palestinian Boycott, Divestment, Sanctions (BDS) movement. Under Israeli law, backers of the BDS movement can be denied entry to Israel.

Trump has vented in recent months against Omar, Tlaib and two other Democratic congresswomen of color, accusing them of hostility to Israel in what has widely been seen as a drumming up of Republican votes for his 2020 reelection bid.

“It would show great weakness if Israel allowed Rep. Omar and Rep.Tlaib to visit,” he tweeted on Thursday. “They are a disgrace!”

No date had been formally announced for the congresswomen’s trip, but sources familiar with the planned visit said it could begin at the weekend.

Israel’s ambassador in the United States, Ron Dermer, said last month Tlaib and Omar would be let in, out of respect for the U.S. Congress and the U.S.-Israeli relationship.

Political commentators said a reversal of Israel’s original intention to approve the legislators’ entry likely stemmed from a desire to mirror Trump’s hard line against them.

An Israeli official said earlier on Thursday that Prime Minister Benjamin Netanyahu and other senior members of his cabinet held consultations on Wednesday on a “final decision” about the visit.

Denying entry to elected U.S. officials could further strain relations between Netanyahu, who has highlighted his close ties with Trump in his current re-election campaign, and the Democratic leadership in Congress.

HOLY SITE

A planned tour by the two lawmakers of the holy compound in Jerusalem that houses al-Aqsa mosque, and which is revered by Jews as the site of two biblical Jewish temples, turned into an issue of contention, according to sources familiar with preparations for the visit.

The flashpoint site is in an area of Jerusalem that Israel captured along with the West Bank in the 1967 Middle East war and annexed in a move not recognized internationally.

An official in Israel’s internal security ministry said any visit by Tlaib and Omar to the complex, revered by Muslims as the Noble Sanctuary and by Jews as the Temple Mount, would require Israeli security protection.

Violence erupted there on Sunday between Israeli police and Palestinians amid tensions over visits by Jewish pilgrims on a day when the Muslim holiday of Eid al-Adha and the Jewish fast day of Tisha B’Av overlapped.

Tlaib, 43, who was born in the United States, draws her roots to the Palestinian village of Beit Ur Al-Fauqa in the West Bank. Her grandmother and extended family live in the village.

Omar, who immigrated to the United States from Somalia as a child, represents Minnesota’s fifth congressional district.

In February, Omar, 37, apologized after Democratic leaders condemned remarks she made about the pro-Israel lobby in the United States as using anti-Semitic stereotypes.

(Reporting by Rami Ayyub and Jeffrey Heller in Jerusalem and Makini Brice in Washington; Additional reporting by Maayan Lubell in Jerusalem; Editing by Hugh Lawson and Frances Kerry)

NATO chief cites Russia threat in address to U.S. Congress

NATO Secretary General Jens Stoltenberg addresses a joint meeting of the U.S. Congress in the House Chamber on Capitol Hill in Washington, U.S., April 3, 2019. REUTERS/Joshua Roberts

By Patricia Zengerle and Doina Chiacu

WASHINGTON (Reuters) – The head of the North Atlantic Treaty Organization warned the U.S. Congress on Wednesday of the threat posed by “a more assertive Russia” to the alliance, including its violations of the Intermediate-range Nuclear Forces Treaty.

“NATO has no intention of deploying land-based nuclear missiles in Europe,” NATO Secretary General Jens Stoltenberg said. “But NATO will always take the necessary steps to provide credible and effective deterrence.”

Stoltenberg also used his speech to give a ringing defense of “the most successful alliance in history,” which has often been derided by U.S. President Donald Trump.

Members of Congress, who greeted Stoltenberg with repeated cheers and standing ovations, said they viewed his address to the joint meeting of the House of Representatives and Senate as a chance to reaffirm the American committee to the NATO alliance.

Stoltenberg was the first Norwegian ever accorded the rare honor of such an address.

“NATO has been good for Europe, but NATO has also been good for the United States,” Stoltenberg said.

Stoltenberg met on Tuesday with Trump, who said his pressure on NATO nations to pay more for their defense is leading to tens of billions of dollars more in contributions, but the allies may need to boost their budgets even more. [L1N21K15D]

Stoltenberg said NATO member countries are “adding billions” in defense spending.

(Reporting by Patricia Zengerle and Doina Chiacu in Washington; Editing by James Dalgleish)

U.S. Congress advances border security bill without Trump border wall

A visitor walks by the U.S. Capitol on day 32 of a partial government shutdown as it becomes the longest in U.S. history in Washington, U.S., January 22, 2019. REUTERS/Jim Young

By Richard Cowan

WASHINGTON (Reuters) – The U.S. Congress on Thursday aimed to end a dispute over border security with legislation that would ignore President Donald Trump’s request for $5.7 billion (£4.45 billion) to help build a wall on the U.S.-Mexico border but avoid a partial government shutdown.

Late on Wednesday, negotiators put the finishing touches on legislation to fund the Department of Homeland Security (DHS) through Sept. 30, the end of the fiscal year, along with a range of other federal agencies.

Racing against a Friday midnight deadline, when operating funds expire for the agencies that employ about 800,000 workers at the DHS, the departments of Agriculture, Commerce, Justice and others, the Senate and House of Representatives aimed to pass the legislation later on Thursday.

That would give Trump time to review the measure and sign it into law before temporary funding for about one-quarter of the government expires.

Failure to do so would shutter many government programs, from national parks maintenance and air traffic controller training programs to the collection and publication of important data for financial markets, for the second time this year.

“This agreement denies funding for President Trump’s border wall and includes several key measures to make our immigration system more humane,” House Appropriations Committee Chairwoman Nita Lowey, a Democrat, said in a statement.

According to congressional aides, the final version of legislation would give the Trump administration $1.37 billion in new money to help build 55 miles (88.5 km) of new physical barriers on the southwest border, far less than what Trump had been demanding.

It is the same level of funding Congress appropriated for border security measures last year, including barriers but not concrete walls.

Since he ran for office in 2016, Trump has been demanding billions of dollars to build a wall on the southwest border, saying “crisis” conditions required a quick response to stop the flow of illegal drugs and undocumented immigrants, largely from Central America.

He originally said Mexico would pay for a 2,000-mile (3,200-km) concrete wall – an idea that Mexico dismissed.

Trump has not yet said whether he would sign the legislation into law if the Democratic-controlled House of Representatives and Republican-led Senate approve it, even as many of his fellow Republicans in Congress were urging him to do so.

Instead, he said on Wednesday he would hold off on a decision until he examines the final version of legislation.

But Trump, widely blamed for a five-week shutdown that ended in January, said he did not want to see federal agencies close again because of fighting over funds for the wall.

Senator Richard Shelby, the Republican negotiator who is chairman of the Senate Appropriations Committee, said in a Twitter post he spoke to Trump later on Wednesday and he was in good spirits. Shelby told Trump the agreement was “a downpayment on his border wall.”

‘NATIONAL EMERGENCY’

Republican Senator Lindsey Graham, who is in regular contact with the White House, said Trump was “inclined to take the deal and move on.”

But Graham also told reporters that Trump would then look elsewhere to find more money to build a border wall and was “very inclined” to declare a national emergency to secure the funds for the project.

Such a move likely would spark a court battle, as it is Congress and not the president that mainly decides how federal funds get spent. Several leading Republicans have cautioned Trump against taking the unilateral action.

Under the bill, the government could hire 75 new immigrant judge teams to help reduce a huge backlog in cases and hundreds of additional border patrol agents.

Hoping to reduce violence and economic distress in Central America that fuels immigrant asylum cases in the United States, the bill also provides $527 million to continue humanitarian assistance to those countries.

The House Appropriations Committee said the bill would set a path for reducing immigrant detention beds to about 40,520 by the end of the fiscal year, down from a current count of approximately 49,060.

Democrats sought reductions, arguing that would force federal agents to focus on apprehending violent criminals and repeat offenders and discourage arrests of undocumented immigrants for minor traffic violations, for example.

The Senate Appropriations Committee, which is run by Republicans, said there were provisions in the bill that could result in an increase in detention beds from last year.

Lowey said the bill would improve medical care and housing of immigrant families in detention and expand a program providing alternatives to detention.

The wide-ranging bill also contains some important domestic initiatives, including a $1.2 billion increase in infrastructure investments for roads, bridges and other ground transport, as well as more for port improvements.

With the 2020 decennial census nearing, the bill provides a $1 billion increase for the nationwide count. Also, federal workers, battered by the record 35-day partial government shutdown that began on Dec. 22 as Trump held out for wall funding, would get a 1.9 percent pay increase if the bill becomes law.

(Reporting by Richard Cowan; Editing by Robert Birsel and Chizu Nomiyama)

Talks collapse on border deal as U.S. government shutdown looms

FILE PHOTO: Construction fencing surrounds part of the U.S. Capitol building in Washington, U.S. November 2, 2018. REUTERS/Jonathan Ernst/File Photo

By Richard Cowan and Doina Chiacu

WASHINGTON (Reuters) – Talks on border security funding collapsed after Democratic and Republican lawmakers clashed over immigrant detention policy as they worked to avert another U.S. government shutdown, a Republican senator said on Sunday.

“The talks are stalled right now,” Republican Senator Richard Shelby told “Fox News Sunday.” He said the impasse was over Democrats’ desire to cap the number of beds in detention facilities for people who enter the country illegally.

Efforts to resolve the dispute over border security funding extended into the weekend as a special congressional negotiating panel aimed to reach a deal by Monday, lawmakers and aides said.

Democratic Senator Jon Tester played down any breakdown in talks. “It is a negotiation. Negotiations seldom go smooth all the way through,” he told the Fox program. Tester, one of 17 negotiators, said he was hopeful a deal could be reached.

But Shelby put the chances of reaching a deal by Monday at 50-50. No further talks were scheduled, a source told Reuters on condition of anonymity.

The lawmakers hoped to have an agreement by Monday to allow time for the legislation to pass the U.S. House of Representatives and Senate and get signed by President Donald Trump by Friday when funding for the Department of Homeland Security and other federal agencies expires.

Trump agreed on Jan. 25 to end a 35-day partial U.S. government shutdown without getting the $5.7 billion he had demanded from Congress for a wall along the border with Mexico, handing a political victory to Democrats.

Instead, a three-week spending deal was reached with congressional leaders to give lawmakers time to resolve their disagreements about how to address security along the border.

One sticking point has been the Democrats’ demand for funding fewer detention beds for people arrested by U.S. Immigration and Customs Enforcement (ICE) agents. Republicans want to increase the number as part of their drive to speed immigrant deportations.

Since he ran for president in 2016, Trump has pledged to stop the influx of undocumented immigrants by building a wall on the border and crack down on immigrants living in the United States illegally by aggressively conducting more deportations.

‘DESPERATELY NEEDED’

Democrats proposed lowering the cap on detention beds to 35,520 from the current 40,520 in return for giving Republicans some of the money they want for physical barriers, the source familiar with negotiations said.

But Democrats would create a limit within that cap of 16,500 beds at detention facilities for undocumented immigrants apprehended in the interior of the country. The remainder would be at border detention centers.

By having the interior cap, ICE agents would be forced to focus on arresting and deporting serious criminals, not law-abiding immigrants, a House Democratic aide said on Sunday.

Republicans balked at the Democrats’ sub-cap offer, the source said.

Trump weighed in Sunday, saying the Democratic proposal would protect felons. “They are offering very little money for the desperately needed Border Wall & now, out of the blue, want a cap on convicted violent felons to be held in detention!” Trump said on Twitter.

“Claims that this proposal would allow violent criminals to be released are false,” the Democratic aide said.

Republican Senator Lindsey Graham, who is close to Trump, warned against limiting beds. “Donald Trump is not going to sign any legislation that reduces the bed spaces. You can take that to the bank,” he said on Fox News’ “Sunday Morning Futures.”

Lawmakers working on a border deal also have not yet nailed down the amount of money to go for physical barriers along the southern U.S. border, the source said.

While a growing number of Republicans in Congress have made it clear they would not embrace another shutdown, White House budget director Mick Mulvaney said he could not rule it out.

“You absolutely cannot,” Mulvaney, who is also Trump’s acting chief of staff, told NBC’s “Meet the Press” on Sunday. “Is a shutdown entirely off the table? The answer is no.”

Lawmakers, however, were working to avoid it.

On Friday, some of the negotiators said that if Congress could not pass a border security bill by Friday, they would move to pass another stop-gap funding bill to avert a shutdown and allow more time to reach a border deal.

(Reporting by Richard Cowan, Doina Chiacu, Howard Schneider; Editing by Jeffrey Benkoe)

Top U.S. lawmakers to resume border talks, avert shutdown

The personalized gavel of House Appropriations Committee Chairwoman Nita Lowey (D-NY), serving as the Chairwoman of a bipartisan group of U.S. lawmakers from both the U.S. Senate and U.S. House of Representatives, is seen at the start of their first public negotiating session over the U.S. federal government shutdown and border security on Capitol Hill in Washington, U.S. January 30, 2019. REUTERS/Yuri Gripas

WASHINGTON (Reuters) – The top four Democratic and Republican negotiators in the U.S. Congress on border security funding plan to meet on Monday in an attempt to reach a deal that would avert another partial government shutdown by a Friday deadline.

House of Representatives Appropriations Committee Chairwoman Nita Lowey, a Democrat, Senate Appropriations Committee Chairman Richard Shelby, a Republican, and two other senior lawmakers will attend the meeting, according to a congressional aide.

Negotiations broke down during the weekend over funding for immigrant detention beds and physical barriers that would be funded along the U.S.-Mexico border.

The lawmakers hope to reach an agreement on Monday to allow time for the legislation to pass the House and Senate and get signed by Republican President Donald Trump by Friday, when funding for the Department of Homeland Security and several other federal agencies expires.

Trump agreed on Jan. 25 to end a 35-day partial U.S. government shutdown without getting the $5.7 billion he had demanded from Congress for a long-promised wall along the border with Mexico. Democrats oppose a wall, calling it ineffective, expensive and immoral.

Instead, a three-week spending deal was reached with congressional leaders to give lawmakers time to resolve their disagreements about how to address border security.

(Reporting by Richard Cowan; Editing by Jeffrey Benkoe and Will Dunham)