Budget deal or no deal? Pelosi and Mnuchin are talking, but not inking deal yet.

WASHINGTON - As House Democrats and the White House face their most embittered period this year, a pair of leaders on each end of Pennsylvania Avenue has been trying to make progress toward a budget deal.

But an agreement — which would also lift the debt ceiling, removing a major threat to global financial markets — is far from done. A senior administration official, speaking on the condition of anonymity to The Washington Post on Wednesday, threw cold water on the work Speaker Nancy Pelosi, D-Calif., has done with Treasury Secretary Steven Mnuchin, saying the two sides “have a way to go” to resolve their differences.

Mnuchin, for his part, told CNBC on Thursday morning the two sides have reached an agreement on top line budget numbers and are working on offsetting new spending. He said markets shouldn't be concerned about the debt limit.

Pelosi said Wednesday she wants to reach an agreement by the end of this week, in time to put it to a vote in her chamber by next Thursday, a day before lawmakers quit town for the six-week August recess.

The administration official said that timeline "sounds like happy talk from the Speaker who has been absent from talks for the last three months and now is trying to create momentum after a bad couple weeks."

President Donald Trump, who has demonstrated his willingness to blow up a budget agreement at the last minute, remains a wild card.

Considering the toxicity of broader relations between House Democrats and the administration, the apparently productive negotiations between Pelosi and Treasury Secretary Steven Mnuchin toward a deal should come as a happy surprise.

It may be cold comfort, however, for business leaders, investors and others starting to sweat the prospect of a federal debt default (the government bond market is already beginning to register nervousness). And the administration's rejection to Pelosi's cautious optimism Wednesday raises new questions about whether the clashes between the two camps on other matters are bleeding into consideration of must-pass items.

"Both parties want to avoid a crisis that could result in a technical default if the Treasury was unable to pay interest on its debt," Capital Economics wrote in a Wednesday note. "But given the dysfunctional relationship between Trump and the House Democrats, we can't rule out a failure to reach an agreement."

The president, after all, threatened two months ago to quit working on legislative business with House Democrats if they didn't stop investigating him. Pelosi and company haven't heeded that demand. To the contrary, House Democrats voted Wednesday to hold Attorney General William Barr and Commerce Secretary Wilbur Ross in criminal contempt for withholding documents related to their push to add a citizenship question to the 2020 Census. Former special counsel Robert Mueller is set to provide blockbuster testimony to the House Judiciary Committee next Thursday on his investigation of the president.

And House Democrats on Tuesday night capped an unusually turbulent two days over Trump's racist tweets about four freshman Democratic lawmakers by voting to condemn his remarks. In heated floor debate over the measure, Pelosi set off a controversy-within-the controversy by calling Trump's Twitter attack "disgraceful and disgusting, and those comments are racist." The House parliamentarian concluded the speaker's criticism violated the chamber's rules of decorum, but Democrats voted to overrule the judgment.

Nevertheless, throughout the firestorm, Pelosi has continued negotiations with Mnuchin, conducted over a series of phone calls, that people with knowledge of the talks describe as professional and isolated from the party's latest clash with Trump. The two spoke again Wednesday, with Senate Majority Leader Chuck Schumer, D-N.Y., joining in, and Mnuchin connecting from Paris, where he's attending a global summit of finance ministers.

The White House remain divided over $150 billion in spending cuts the administration wants to accompany spending hikes, "a goal that could be out of reach without slashing domestic programs that Democrats want to protect," The Washington Post reported.

In addition, the administration wants a guarantee from Pelosi that she won't seek to add policy riders to future spending bills. "Both of those demands could jeopardize chances for a deal. And they are just two of a handful of areas where agreement has yet to be reached between Pelosi and the Trump administration as time grows short," The Post's report said.

Behind the scenes, the more important differences may not be those between Pelosi and Mnuchin but between Mnuchin and White House acting chief of staff Mick Mulvaney. “That’s one of the biggest hangups right now: Has Mnuchin worked this with Mulvaney?” G. William Hoagland, a former top Senate budget aide now a senior vice president at the Bipartisan Policy Center, tells me. “The real risk here is the president and Mulvaney bull their necks and create a problem. . . You’ve got to have the White House agree to this, and this will become a test as to who sets fiscal policy in this country, the Treasury Secretary or the White House chief of staff.”