In what appears to be the first major concession to Congressional Republican (and Democrat) leaders from the confrontational, "post-Phoenix rally" Trump, whose vow to "build that Wall" even if it means shutting down the government has spooked markets and sent Oct 12 T-Bill yields surging, Politico reports that the president is quietly organizing a meeting with McConnell and Ryan as well as Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi shortly after the August recess ends. The key topics of conversation will be avoiding a federal default and a government shutdown.

On Wednesday, the White House said that Trump and McConnell will meet following the August recess to discuss the fall agenda, but it did not mention the Democratic leaders. While a White House spokesperson didn’t immediately respond to a question about a bipartisan meeting, secretary Sarah Huckabee Sanders said Trump intends to work closely with congressional leaders on shared policy goals.

The meeting, which may still not happen, is sure to be heated: earlier today, in a pair of tweets Trump blamed McConnell and Ryan for creating a “mess” over the debt ceiling, claiming they rejected his call to attach an increase in the nation's borrowing limit to a bipartisan veterans bill.

“I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval. They didn't do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. Could have been so easy-now a mess!” According to Politico, "the tweets underscore the absence of a strategy heading into a delicate month of negotiations that could rock the U.S. economy as well as Trump’s refusal to call a truce in the GOP’s growing civil war." It is a fair assumption.

Trump's recent diplomatic "disintegration" with Mitch McConnell aside, passage of the debt bill would still prove problematic as The White House favors a "clean" debt ceiling hike while conservatives in the House and Senate are loath to back any measure that increases the nation's borrowing authority without corresponding spending cuts and reforms.

Connecting a "clean" debt ceiling hike to a veterans bill would have put them in an untenable position of either voting against their fiscal priorities or against the bipartisan VA measure. Though the notion of tying a debt ceiling increase to the veterans measure was always likely to be doomed, one GOP source said the Senate had been preparing to support it, only to be stymied when House leaders opted to adjourn for the August recess.

Meanwhile, seeking to ease tensions, Paul Ryan said on CNBC that Congress would pass a debt ceiling increase and said there are "a lot of options" about how to structure the legislation. Ryan said the House had looked at linking it to the VA bill, but said a deadline came up and "we weren't able to do that then."

Ryan also suggested that the can of the government shutdown decision will most likely be kicked to December, preventing a near term scramble to resolve both the debt ceiling and government funding:

Ryan also said he expects the House to pass bills to keep the government open in about a week after Congress returns. But he said the Senate's heavy workload in September — which unlike the House includes confirmation of judges, subcabinet officials and ambassadors — will likely require a short-term funding measure to keep the government open until December.

Whether or not that works will ultimately depend on what mood Trump is that day: on Tuesday the president signaled that he's "open to playing hardball for border wall funding, raising the prospect of a shutdown next month if he doesn't sign the short-term funding extension."

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Still, in an indication that Trump's recent hardline rhetoric was merely for theatrical public consumption, the NY Post reported this afternoon that the White House is also showing signs of budging on the tax plan prepared by Gary Cohn, and that the intention to eliminate state and local tax deductions to generate offsetting revenue is starting to show cracks.

In an interview with The Post, a senior White House official said the Trump Administration is willing to compromise on a proposal to eliminate deductions for state and local real estate and property taxes — which would clobber high tax-states like New York. A potential solution is in the works by Rep. Tom Reed (R-NY) who sits on the House Ways and Means Committee that will author the tax reform legislation. He’s proposed creating a tax credit for state and local taxes — rather than a deduction.

Reed told the Post that “If you move it to a tax credit where everyone — even the people who take the standard deduction who wouldn’t be itemizing — they would then have access to a tax credit for those property taxes. It’s just a different way to think about it.”

A senior White House official who is working on tax reform said the White House is open to this solution. “We were there to put the framework together and if committee members decide they want to do a credit and that’s what we need to move this forward, then so be it,” the official told The Post. The goal of the Trump tax plan is to get legislation signed into law this year and to have a positive impact on the economy next year.

For all his bluster, the most likely outcome is that as with Priebus and Bannon, Trump will ultimately fold to external pressure, which means that for yet another year all the worries and fears about a debt ceiling fiasco (and government shutodnw), will have been for nothing. It also means that shortly after a debt ceiling deal is reached, US Federal debt will surge by $600 billion by January 1, 2018, and by $2.2 trillion through October 1, 2019 according to a research report released by the Bipartisan Policy Center released today.