sequestration

Senate Reaches Bipartisan Deal with Sharp Spending Increases

The US Senate reached a 2-year budget deal that sharply increases defense spending and for a range of health care programs. The deal, which will boost the federal deficit and doesn’t deal protection of Dreamers, still must pass muster in the House and with President Trump, even though it doesn’t appear to provide funding for his border wall

The US Senate reached a 2-year budget deal that sharply increases defense spending and for a range of health care programs. The deal, which will boost the federal deficit and doesn’t deal protection of Dreamers, still must pass muster in the House and with President Trump, even though it doesn’t appear to provide funding for his border wall

[UPDATE: Early on Friday, February 9, the Senate passed a continuing resolution in effect until March 23 that authorizes spending levels contained in the bipartisan Senate budget deal. Later in the morning, the House passed the continuing resolution and President Trump signed it. The temporary government shutdown lasted only a few hours. Federal government employees reported to work as normal.]

 

The Senate reached a bipartisan budget deal that will boost federal spending by $300 million over the next two years and suspend the debt ceiling for one year, but without resolving immigration issues. The House and President Trump still must agree, which is not automatic.

House conservatives voiced concern about increased spending that will push up the federal deficit even further after GOP-backed tax-cut legislation late last year. House Democrats were furious the Senate deal didn’t include protection for Dreamers who may face deportation after Trump’s March 5 deadline. Speaker Paul Ryan said he believes the votes exist in the House to approve the Senate compromise.

There also may be some procedural issues slowing the vote in the Senate that could result in a temporary government shutdown scheduled for midnight tonight. And President Trump has yet to officially sign off on the deal, which doesn’t appear to include money for his border wall.

The biggest spending increase goes for defense – $80 billion in Fiscal Year 2018 and $85 billion in Fiscal Year 2019. Caps on non-defense discretionary spending would increase by $63 billion this year and $68 billion next year. Almost $90 billion is provided for disaster relief. There appears to be a $20 billion down payment on the Trump infrastructure package.

The increases give both political parties plenty to crow about and resolve a nagging budget issue that is a hangover of sequestration that went into effect in 2011.

If the Senate budget deal survives, congressional appropriators are expected to write an omnibus FY 2018 appropriations bill that moves up total spending from $1.065 billion allowed under current law to $1.208 trillion as provided in the Senate budget agreement.

The deal also includes some other significant provisions:

  • A one-year extension of expired tax breaks that were not included in the December 2017 tax reform bill, including the Alternative Fuels Tax Credit.
  • Four additional years of extension of the CHIP program after the six-year extension enacted last month runs out.
  • Two years of renewed funding at around $7 billion for community health centers, $6 billion for mental health treatment and opioid addiction and $2 billion in additional funding for the National Institutes of Health. Notably absent, however, was funding to shore up the Affordable Care Act, which was the concession promised to Maine Senator Susan Collins in return for her vote for the GOP tax cut. The deal does continue to delay any cuts to hospitals that serve a disproportionately high share of low-income patients.
  • Accelerated elimination of the “doughnut” in Medicare in pre-catastrophic care drug coverage and elimination of the controversial Medicare Payment Advisory Board. The limit on Medicare coverage for physical therapy would be permanently repealed.
  • $500 million to the National Health Service Corps and $363 million for the Teaching Health Center Graduate Medical Education program to encourage doctors to practice in underserved areas.
  • Creation of a new Joint Select Committee on Solvency of Multiemployer Pension Plans, to produce legislation fixing the Pension Benefit Guaranty Corporation by December 2018 with a guarantee that the bill will get a vote in the Senate under “fast track” procedures.
  • Creation of a new Joint Select Committee on Budget and Appropriations Process Reform, to produce legislation fixing the broken congressional budget process by December 2018 with a guarantee that the bill will get a vote in the Senate under “fast track” procedures.

An estimated $100 billion in “pay-fors” were included in the package to mitigate the effect of non-defense spending on the federal deficit. They include:

  • An extension of the portion of Transportation Security Administration aviation security fees that go towards deficit reduction into fiscal 2026 and 2027, estimated to total $1.64 billion in 2026 and $1.68 billion in 2027.
  • Selling oil from the Strategic Petroleum Reserve.
  • Taking money from the Federal Reserve’s surplus fund.
  • Extending sequestration of non-exempt mandatory programs (mostly Medicare) into fiscal 2026 and 2027.

    Joel Rubin is a partner and leader of CFM’s federal affairs team based in Washington, DC. He has worked on Capitol Hill and now represents Pacific Northwest interests in Congress and with federal agencies.

Boehner Bombshell Shifts Capitol Landscape

Speaker John Boehner's bombshell resignation announcement shifted the political ground on Capitol Hill, making short-term issues easier to resolve, but creating some longer term obstacles that may be harder to move.

Speaker John Boehner's bombshell resignation announcement shifted the political ground on Capitol Hill, making short-term issues easier to resolve, but creating some longer term obstacles that may be harder to move.

Speaker John Boehner's surprise announcement to retire at the end of October has shifted the landscape on Capitol Hill and may presage an even more dramatic shift later this year.

No longer beholden to the "Freedom Caucus"  – the far right flank of the GOP, Boehner has the flexibility to push more moderate legislation through the House over the next 32 days. The question is, how much can he really get done and what are the short- and long-term implications for the next House Speaker?

In the short-term, the retirement announcement has provided breathing room for the Speaker. The chances of an October 1 government shutdown have nearly evaporated, bipartisan passage of a drama-free debt ceiling bill is more likely and there is hope for a compromise on a transportation/tax reform package. Without the constant threat of a motion to "vacate the Speaker," other bills could hitch a ride on a fast track, including reauthorization of the Export-Import Bank.

Don't get too optimistic. It's also clear the next Speaker will have to deal with the consequences of an unhinged Boehner. Next in line to the Speakership is Boehner friend and ally, Majority Leader Kevin McCarthy from California. The more bipartisan legislation that moves in October, the higher the level of conservative frustration later in the GOP caucus. To be elected Speaker, McCarthy can only lose 29 votes from the GOP ranks – 24 of whom already voted against Boehner in January. Thus, McCarthy can only lose five more Republicans to avoid an all-out scramble for the Speaker's position. 

If McCarthy is tied to the Speaker's actions over the next month, his ascension to Speaker could be put in jeopardy. So Boehner is still going to have to balance the risks and rewards of moving legislation in his final days. Bipartisan action would continue to stoke tensions within the Republican Party and could bring the confrontation past the boiling point to a full revolt. Boehner is a master politician though, so he may manage to clear the decks of some of the most contentious issues and leave the institution he loves on a high note.

Here is some quick analysis on how key provisions could be impacted by the Speaker's departure:

September 30 Budget Showdown/Shutdown – Boehner is no longer beholden to the far right and word from GOP leadership is the Speaker will offer up a clean Continuing Resolution (CR) to keep the government funded through December 11. The CR will not contain the controversial repeal of funding for Planned Parenthood. Without the Planned Parenthood funding repeal, the GOP will lose 30-50 votes for the CR and Republicans will need to rely on Democrats to pass the bill. The measure will likely pass by Wednesday evening, just in time for the September 30 end of fiscal year deadline.

Debt Limit Increase – Another casualty of Boehner's departure could be a showdown over the debt limit. With an historic debt of $19 trillion, the country needs to increase its credit limit once again before it defaults. Unfortunately, the debt limit increase is becoming an annual affair. 

The timeline for default is not exact, but will likely happen in November. It's expected Boehner will try to act before he leaves office to clear the decks for the next Speaker. Typically, the Freedom Caucus has been steadfast in its opposition to raising the debt limit without a dollar-for-dollar cut in spending. The Obama Administration meanwhile has said the debt limit is not a tool for negotiation, even though in 2011, that's how we got the Super Committee and Sequestration. 

Transportation and Tax Reform– The fate of the transportation bill also could benefit. Word out of leadership and the House T&I Committee is that Chairman Bill Shuster and Ways and Means Chairman Paul Ryan have a six-year package that is ready to be unveiled. With the blessing of the Speaker, a transportation/tax reform package could receive an expedited path to the floor of the House. Many Freedom Caucus members have opposed additional federal spending on transportation. October could be the perfect time to get a popular bipartisan bill through the House.

Sequestration Cap – Without another 2013 Murray/Ryan type of agreement, the two-year sequestration relief bill will expire October 1. Both Republicans and Democrats want to lift the cap, but for different reasons. Republicans generally want more defense spending, while Democrats want more non-defense spending. It is hard to be optimistic that the Speaker can reach a deal to lift the spending caps before he leaves. However, there will certainly be pressure on him to expedite negotiations and resolve the issue.

December 11 – The likelihood of a government shutdown on December 11 has gone up significantly. An emboldened Freedom Caucus, a lame duck President Obama and presidential politics are could conspire to make this a tumultuous December. It will take  fancy footwork from both sides to come together on the FY16 spending package.

Northwest Given Key Role on New Budget Panel

One of the key provisions included in the debt limit and funding agreement signed last night was formation of a House-Senate Budget Conference Committee. The Pacific NW is well represented on the newly formed, 29-member committee with Senators Patty Murray (D-WA), Ron Wyden(D-OR), Jeff Merkley(D-OR) and Mike Crapo (R-ID).

The newly constituted committee is tasked with hammering out differences between the House and Senate FY14 spending levels. The House spending level is $90 billion lower than the Senate proposal.  The Committee is required to report on an agreement by December 13.  However, unlike the Supercommittee established in 2011, there is no penalty for failure. 

There is faint optimism that both sides can come together on a "baby" grand bargain to lift temporarily the sequestration spending caps by making cuts to entitlement programs such as Social Security and Medicare.

As you could guess, optimism is subdued by a meager track record of agreement and the hyper-partisan climate in Washington.  However, both sides seem interested in raising the sequestration caps.  Democrats want to increase domestic spending levels and Republicans defense spending.  Both sides feel programs are being severely squeezed under the caps and thus there may be room for a small, short-term deal. 

Full Plate Greets Returning Congress

After five weeks back home, Congress returns to what shapes up as an issue-busting fall, starting with a charged debate over U.S. military action in Syria. But not far behind are titanic battles over the federal debt ceiling, a Continuing Resolution, immigration reform and the farm bill.

Even before President Obama lobbed his political grenade over military action in Syrian into the halls of Congress, the House and Senate faced a daunting schedule, including an effort by some conservative Republicans to stage a final showdown over funding for Obamacare. 

The political fireworks start Tuesday when Obama addresses the nation to make his case for targeted military strikes in retaliation for the use of chemical weapons by Bashar al-Assad's Syrian regime. It will take every ounce of communication wizardry by Obama to convince a war-weary nation and a skeptical Congress to authorize use of military force. He may have the necessary votes in the Senate, but not in the House, where both liberal Democrats and conservative Republicans may combine to block a majority.

Key votes on Syria are expected this week. It is unclear whether Obama will blast away with or without congressional approval. But it also is possible that new developments could occur. For example, Russia said it would push Syria to turn over control of its chemical weapons to international authorities.

One positive from the divisiveness over Syria is that House GOP leaders have soured on the idea of a contentious fight over a Continuing Resolution, at least right now while the nation's attention is diverted. This could lead to a short-term extension of federal spending authority until later in the fall when Republican strategists believe they will have more political leverage.

Even though the House and Senate Appropriations committees have acted on nearly all spending measures, the Senate hasn't passed any of them and the House has only passed four. That could lead to an omnibus appropriations measure or measures to catch up. 

Converging Fiscal Policy Dilemmas

Conservative Republicans want to force a final showdown over Obamacare, which coincides with another vote on the federal debt ceiling and unraveling inequities caused by across-the-board spending cuts ordered by sequestration.When Congress returns after its August recess, another financial crisis looms as conservative Republicans threaten to shut down the federal government unless Obamacare is defunded.

Shutting down the federal government is probably never a good things, but it may be especially bad timing this fall in light of new leaks showing privacy abuses by the National Security Agency and smoldering trouble in the Middle East as Egypt tips back to a dictatorships. Even Greece is making noises it needs another bailout, which in the past has put a damper on international economic recovery.

Egged on by groups such as the Heritage Foundation and former House GOP rabble-rouser Jim DeMint, conservative Republicans are demanding a final political showdown on the Affordable Care Act. They say they are willing to risk a government shutdown and the economic and political consequences to block the signature achievement of President Obama in his first term. Many are out on the political hustings encouraging voters to pressure their representatives to sign the defund-Obamacare petition.

A Congress Going in Political Circles

Congressional Republicans have sniped that President Obama is still on the campaign trail after winning re-election last fall. But they are staging their own political theater on the House and Senate floors in offering up budgets that state their principles, but will never be enacted.

Democrats, of course, are doing the same thing, only it takes a lot longer to produce a non-result in the Senate. The GOP-controlled House, after slapping down a Democratic-principle budget, passed its Republican-principle budget and left town. The Senate is still at it, doing the same thing with the same outcome. Eventually it will leave town, too.

All the budget talk is really script-writing for the 2014 congressional elections. Democrats talk about the need to invest to grow the economy. Republicans say reduced spending and a balanced budget will foster economic growth.

Yet some observers take heart that there is light at the end of the tunnel, even if it is the size of a penlight. Buried in all the budget principles of both parties is procedural language that will allow the Senate eventually to vote on a compromise budget without being held hostage to filibuster threats. This wouldn't hearten most people, but in Washington, DC these day's this is what passes for a hopeful sign. After all, in previous years Senate Democrats didn't even bother to produce a budget.

Long Lines Traced to Budget Sequester

Want to find evidence of the federal budget sequester having an effect? Just look at the long, soggy lines outside Capitol office buildings where people are waiting because overtime for Capitol Police guards has been trimmed. [Credit: CQ Roll Call]If you want to know where federal budget sequestration really hurts, ask the people standing in line in the rain to get into one of the House and Senate office buildings on Capitol Hill.

To avoid "compromising security" because of the loss of overtime pay for guards, the Capitol Police closed a dozen entrances around the Capitol. As a result, Roll Call reports there were lines of people, stretching in some cases an entire block, waiting to get in a building to meet with their congressman or senator. Some probably missed their appointments. Everyone got soaked.

And the long lines won't disappear any time soon, Capitol Police say. They don't have the staff levels, with budget cuts, to reduce the congestion.

Trying to find the silver lining, some congressional staffers are taking pains to advise visitors to show up early so they aren't late for their Capitol Hill appointments. They might be treading on tender feelings by noting the lines are the result of the inability of Congress to find a budget compromise to replace large, across-the-board spending cuts.

Mexico Moves Past Paralysis

The news has been filled for weeks about the disastrous fallout expected from $85 billion in across-the-board budget cuts that go into effect Friday, all because Congress can't get its act together to avoid so-called sequestration. 

Leave it to New York Times columnist Thomas Friedman to find an improbable contrast in governance in, of all places, Mexico. 

Americans think of Mexico as a basket case under the thumb of violent drug lords. In a column, Friedman says that's still true, but points out a wave of new activism aimed at breaking political paralysis and building a stronger economy.

"Mexico still has huge governance problems to fix," writes Friedman, "but what's interesting is that, after 15 years of political paralysis, Mexico's three major political parties have just signed a 'grand bargain' under the new president, Enrique Pena Nieto, to work together to fight the big energy, telecom and teacher monopolies that have held back Mexico. If they succeed, Mexico will teach us something about democracy."

The Mexican turnaround, Friedman explains, is not limited to government. He notes an astonishing number of new technology startups in Monterrey, which he visited. Friedman attributed this newfound economic energy to 50 percent of the Mexican population being 29 years or younger and to "cheap, open source innovation tools and cloud computing" — or in other words, 21st Century digital infrastructure. Mexico also is producing more engineers and skilled workers, helping to attract U.S. and other foreign investment, which pushed up its growth rate last year to 3.9 percent.

Lame Duck for Holiday Season

Congress is back in town to stare at the same tax, debt and jobs issues as before the election — with the same fiscal cliff looming in a mere 48 days.

In addition to the impact of the 2012 election results, the lame duck congressional session has experienced the financial reverberations of cleaning up after Hurricane Sandy and the surprising sexual revelations that forced the resignation of popular CIA Director David Petraeus.

Pending fiscal mayhem mixed with a DC political drama combining sex, power, cover-ups, imprudent emails and possible national security lapses provides the perfect punctuation mark for what has been a tortuous and seemingly endless political season.

So while Republicans pondered how to reinvent themselves and Democrats openly negotiated on how to negotiate, the Congressional Budget Office renewed its warning of a potential recession unless Congress reaches a bipartisan agreement to avert sharp tax increases and automatic, across-the-board spending cuts. CBO says the U.S gross domestic product in 2013 could drop by 0.5 percent and unemployment rise to more than 9 percent.

Members from both major political parties appear eager to resolve the problem, but at the moment are jockeying for position. House Speaker John Boehner told his chastened GOP caucus some compromise on revenue will be necessary. Democratic Budget Committee leaders signaled an interest in the income tax deduction cap proposed by GOP presidential candidate Mitt Romney, which echoed an idea earlier surfaced by President Obama.