"We've agreed to put together, at the staff level, a group to begin discussing the possibility of reaching a two-year (spending) caps deal so we can move ahead hopefully with some kind of regular appropriations process," McConnell told reporters.
A new funding agreement is needed to prevent the return of spending cuts under the remnants of a failed 2011 budget and debt agreement. Trump has only reluctantly signed spending bills during his two years in office, and his acting chief of staff, Mick Mulvaney, is a budget hawk who's signaling that the White House is taking a harder line this time around.
Trump's budget, submitted last month, would give a sharp increase to the Pentagon but would cut back domestic programs, a nonstarter for Democrats controlling the House. Any bipartisan agreement would renounce Trump's budget, which drew criticism from both Democrats and Republicans when it was unveiled last month.
The administration gave a chilly reaction to the developments. "Democrats aren't even writing a budget and are pushing for a reckless 'caps deal' that would cost taxpayers over $2 trillion and explode deficits," said a senior administration official, speaking on condition of anonymity because the discussions have been private. "We've made clear to Congress that type of a wasteful spending is unacceptable."
Meanwhile, a revolt by liberal Democrats against a separate budget measure backed by Pelosi, D-Calif., and other House party leaders led the leadership to cancel a vote on it that had been tentatively scheduled for Wednesday. That proposal would have increased spending for both the Pentagon and domestic agencies. The increases would ease the way for this year's round of annual congressional spending bills this spring.
Progressives said the leadership-backed plan didn't contain enough money for liberal priorities. They're pushing for significantly higher spending for domestic programs, saying the Pentagon budget is bloated while domestic programs are being shortchanged.
"For me the big issue is freezing defense spending," said Rep. Ro Khanna, D-Calif. "I don't think this is an issue of divided government. This is an issue of a divided Democratic caucus on issues of defense spending. Let's go on the record and vote on whether we should be increasing defense spending or not."
The guns vs. butter debate has split the Democratic caucus, pitting progressives from solidly Democratic districts against more moderate Democrats from more marginal political turf. The moderates say liberals' demands are politically unrealistic and would add too much to the deficit.
Even as the leadership proposal foundered, the House on Tuesday quietly adopted a resolution that would permit the chamber to begin voting on the annual spending measures, though it didn't pick winners and losers between the defense and nondefense sides of the federal ledger.