Washington Bulletin 12/11

December 11, 2017
Washington Update

On Capitol Hill

Congress Passes Two-Week Spending Bill to Avoid December 9 Shutdown

Congress passed a two-week extension of federal funding that averts a government shutdown this week but defers decisions on spending levels for defense and domestic programs.

The House voted 235 to 193 in favor of the extension Thursday afternoon followed quickly by the Senate, which passed it 81 to 14. Lawmakers now have until Dec. 22 to settle some larger issues on spending and legislation. At the same time, they will be rushing to finish work on tax legislation before leaving Washington for the holidays. The final measure extended funding for the Children’s Health Insurance Program (CHIP) and the National Flood Insurance Program to the end of the year.

The bill, H.J. Res. 123, passed after leaders of both parties agreed to continue negotiating on larger issues and after House Speaker Paul Ryan quelled a rebellion among some conservatives who wanted a longer stopgap bill as part of a strategy to avoid giving concessions to Democrats on spending.  On Friday, December 8, President Donald Trump signed the continuing resolution.

Continued Negotiations

The votes in the House and Senate followed a meeting between top congressional leaders and President Trump at the White House to negotiate a longer-term budget agreement that could raise military and non-defense spending above caps put into place following the 2011 standoff over raising the debt ceiling.

President Trump met with congressional leaders from both parties Thursday, December 8, to negotiate on a long-term budget deal as Congress prepared to pass a stopgap spending measure to avoid a U.S. government shutdown Saturday. A key issue had been whether the $549 billion defense spending cap would be raised by a larger amount than the $516 billion non-defense cap.

Ahead of Thursday, December 8, White House meeting Schumer said Democrats were working in “good faith” toward a year-end deal that would meet some of their priorities, including equal boosts in funding for non-defense and defense programs and a measure protecting young undocumented immigrants from deportation. Republicans and Democrats have discussed a potential two-year agreement raising spending by about $200 billion.

Democrats boycotted a similar gathering last week after President Trump tweeted that he didn’t see a deal as being possible. President Trump said earlier last week that a government shutdown “could happen” because of Democratic demands.

Equal Funding

Second-ranking Senate Democrat Dick Durbin (D-IL) said his party would not support a full-year defense bill without funding the other government agencies.

Democratic Senator Jack Reed of Rhode Island (D-RI) said passing a full-year spending bill only for defense would shortchange other national security operations such as the Federal Bureau of Investigation and activities of the State Department.

 

How the House and Senate Will Resolve Differences Over Tax Bills

Earlier last week House and Senate lawmakers began working out significant differences in their versions of the tax bill so they can send it to President Donald Trump for his signature.

The Senate voted 51-49 early on Saturday, December 2, to pass a bill (H.R. 1) that would cut the corporate tax rate to 20 percent from 35 percent in 2019, and would provide temporary tax cuts for individuals that expire in 2026, among other provisions. The House passed its version on Thursday, November 16.

To become law, bills must be passed by both the House and Senate with identical language, under the same number. When the chambers pass different versions of a bill, they can agree to hold a conference where differences are hashed out in at least one public meeting as well as through closed-door negotiations.

Last week party leaders choose members of the conference committee. They’re usually drawn from the committees of jurisdiction, with chairmen of the committees typically taking the lead roles. For the tax bill, House managers will include members of the tax-writing Ways and Means Committee and the Natural Resources Committee.

Representative Kevin Brady (R-TX), chairman of the House Ways and Means Committee, and Senator Orrin Hatch (R-UT), chairman of the Senate Finance Committee, will play major roles in shaping the final product.

Senate Majority Leader Mitch McConnell on Wednesday, December 6, announced the eight Republican senators who would serve on the conference committee, naming Senators Orrin Hatch (R-UT), Mike Enzi (R-WY), Lisa Murkowski (R-AK), John Cornyn (R-TX), John Thune (R-SD), Rob Portman (R-OH), Tim Scott (R-SC), and Pat Toomey (R-PA.).

Senate Minority Leader Chuck Schumer announced on Thursday, December 8, the seven senators who will represent the Democratic caucus on the bicameral conference committee Three of the members will be Senators Ron Wyden (D-OR), ranking member on the Senate Finance Committee, Bernie Sanders (D- VT), ranking member on the Budget Committee, and Maria Cantwell (D-WA), ranking member on the Energy and Natural Resources Committee who also sits on the Finance Committee.

Other Finance Committee members appointed to the conference committee include Senators Debbie Stabenow (D-MI), Robert Menendez (D-NJ), and Tom Carper (D-DE).

Senator Patty Murray (D-WA) a budget committee member, will also serve as a conferee.

Earlier in the week the House announced their conferees as well with Representative Kevin Brady, the Chairman of the House Ways and Means Committee, to chair the bicameral conference. The House Republican conferees are Representatives Peter Roskam (R- IL), Devin Nunes (R-CA), Diane Black (R-TN), Kristi Noem (R-SD), Rob Bishop (R-UT) Don Young (R-AK), Greg Walden (R-OR), and John Shimkus (R-IL). House Democrats selected Representatives Richard Neal (D-MA), Sander Levin (D-MI), Lloyd Doggett (D-TX), Raul Grijalva (D-AZ), and Kathy Castor (D-FL).

Congress Talks Tax Deal as President Trump Signals Corporate Rate Retreat

Once an agreement is reached, the members of the conference committee are asked to review the compromise and sign a conference report. That report typically includes proposed legislative text and a joint explanatory statement that describes the agreement.

If a majority of each chamber’s delegation signs the conference report, it can go to the full House and full Senate. Both chambers must adopt the conference report for the underlying legislation to advance to the president’s desk. Neither chamber can make changes to the agreement after the conferees sign it.

The three biggest stories in Washington — a broad overhaul of the U.S. tax structure, a health-care makeover and a spending bill that would avert a government shutdown — all depend, more or less, on one moderate Republican senator who says she’s got a deal that could deliver them all.

The only trouble is, Senator Susan Collins’s (R-ME) deal could unravel fast, putting the Maine lawmaker and her party in a tight spot as GOP leaders seek a major policy win in 2017.

She joined 50 of her GOP Senate colleagues in voting for tax legislation — but only after securing what she’s called a promise that Congress would pass two other bills before year’s end. Both measures are aimed at shoring up insurance marketplaces that experts say would be ravaged by one part of the Senate tax bill: a repeal of the “individual mandate” imposed by the 2010 the Affordable Care Act law.

The promise came from Senate Majority Mitch McConnell — who has struggled to deliver a vote in his own chamber, let alone one across the capitol. It is by no means clear that either of the health care bills she bargained for will get anywhere in the House, where conservatives regard at least one of the measures with disdain.

House Speaker Paul Ryan — who wants to repeal the Affordable Care Act’s mandate that individuals buy insurance or pay a federal penalty – said Senator  Collins has “put some very productive, constructive solutions on the table” that will “invite a new conversation about how we fix health care.”

One-Vote Margin

Uncertainty over the House’s intentions poses a dilemma for Senator Collins, who says additional laws are needed to mitigate health-insurance premium hikes that would “almost certainly” result from the individual mandate’s repeal. But it’s also a challenge for Senate GOP leaders — who are currently trying to hammer out a compromise tax bill with their House counterparts

Losing Senator Collins would cut their one-vote margin on the tax bill to zero, putting the prospects of final passage in a more precarious state.

The two Senate bills that Senator Collins is seeking include one proposed by Senators Lamar Alexander (R-TN) and Patty Murray (D-WA); it would make “cost sharing” payments to insurers who take on sicker patients. The other, sponsored by Senators Collins and Bill Nelson (D-FL), would boost reinsurance funding. Senator Collins says both would help hold down anticipated premium hikes from axing Obamacare’s individual mandate.

White Flag

The nonpartisan Congressional Budget Office estimates that zeroing out the mandate penalty would lead to 13 million people dropping their coverage and to premiums rising by 10 percent in most years of the ensuing decade. It would put more pressure on an already unsteady Affordable Care market as it could lead to an exodus of healthy people and cause insurers to raise prices to cover the cost.

The Alexander-Murray bill has legs in the Senate, but it’s toxic to many House conservatives, who decry it as a taxpayer “bailout” of insurance companies.

Conservative advocates could make it politically painful for Ryan to even bring the bill to a vote. “We think it’s a bad idea,” said Rachael Slobodien, a spokeswoman for the conservative Club For Growth. “Alexander-Murray is so unpopular, why would they want to sully tax reform with that?”

Boost from President Trump?

Senator Mike Rounds (R-SD) said it’ll be a “pretty easy lift” for Senate Republicans to get behind Alexander-Murray, but he acknowledged that it’ll be difficult in the House. He suggested that President Donald Trump could help.

“That’s where the challenge is, and I think that’s where the president really can come in to help us with it,” Rounds said.

He voiced hope that once skeptical House conservatives “find out that the president is supportive” of the legislation — and that it’s not a bailout, but a risk-adjustment mechanism, “we’ll be able to come around the get the votes we need.”

The White House didn’t commit to supporting either bill Senator Collins wants.

“The President supports the repeal of the individual mandate,” said Hogan Gidley, deputy White House press secretary. “We have also had productive discussions with Congress about how to temporarily provide stability in the marketplace. However, we’re not going to get ahead of any negotiations until a bill is presented to us.”

The issue looms large over government-funding negotiations as well — after Congress approved a stopgap measure to push the shutdown deadline from Dec. 8 to Dec. 22. That measure coming up in two weeks may be the most — if not the only — viable vehicle for the Alexander-Murray and Collins-Nelson bills to pass before lawmakers break for the holidays.

Senator John Cornyn, the chamber’s No. 2 Republican, said he thinks many of the House Republicans who are questioning Alexander-Murray will change their minds.

Senate Majority Leader Mitch McConnell has indicated a desire to complete the tax conference next Friday, December 15.

 

In the Administration

White House Gears up to lay out Infrastructure Plan

President Donald Trump plans to keep pushing his legislative agenda in 2018 by releasing his long-promised infrastructure proposal in early January.

Infrastructure advocates question whether a Republican-led Congress will be able to pass a spending plan with enough federal funding if it’s already approved a tax measure that official estimates say would bloat the budget deficit. Some say the Trump administration missed its best opportunity to deliver a meaningful public works initiative by not incorporating it into the tax bill, which is nearing approval.

The Russell 3000 Building Materials Index gained as much as 2.2 percent on the news and closed up 1.8 percent, as companies including Summit Materials Inc., Vulcan Materials Co. and Martin Marietta Inc. spiked sharply higher.

President Trump Promised

President Trump promised during his campaign to introduce a $1 trillion proposal within his first 100 days in office, then the Trump administration said there’d be a plan by the third quarter. That did not happen after the failed attempt to overhaul health care and the ongoing tax effort.

The President aims to release a detailed document of principles, rather than a drafted bill, for upgrading roads, bridges, airports and other public works before the January State of the Union address.

The White House plan is essentially complete and President Trump recently reviewed it. It calls for allocating at least $200 billion in federal funds over 10 years to spur at least $800 billion in spending by states, localities and the private sector.

The plan would put the federal dollars in four areas: cash for states and localities, with preference for entities that generate their own funding as well; formula block grants for rural areas; federal lending programs; and money for “transformational” work such as plans to build high-speed trains in tunnels by Boring Co., which was founded by Elon Musk.

Shifting Responsibility

The guiding principle of the plan is to shift responsibility for funding from the federal government to states and localities — which own or control most assets — by providing incentives for them to generate their own sustainable funding sources and work with the private sector.

Still, some governors and mayors have already balked, saying they’re doing their fair share and that much more federal funding is needed to meet what the American Society of Civil Engineers has estimated to be a $2 trillion funding gap for infrastructure by 2025. Some advocates say the best chance was to include measures such as a higher gas tax or levies on corporate profits returned from overseas in the tax overhaul.

“We need to be honest with the American people: failure to find the revenue for an infrastructure initiative now, as part of tax reform, will make passage of such a package nearly impossible in the future,” Bud Wright, executive director of the American Association of State Highway and Transportation Officials, said in a letter last month to Senate leaders.

Too Difficult

A White House official said it would have been too difficult to combine infrastructure with the tax bill. The plan now is to give Congress a blueprint for a bill and allow the details — including funding — to be negotiated in a bipartisan way, the official said.

The U.S. Chamber of Commerce sees the $200 billion amount as “a floor, not the ceiling,” said Ed Mortimer, the chamber’s executive director for transportation infrastructure.

The chamber has advocated raising the federal gas tax, which has not been increased since 1993 as the easiest and fairest way to generate money. The Trump Administration has not endorsed the idea but has not taken it off the table, either.

Cautiously Optimistic

Michael Burke, chairman and chief executive of AECOM, the world’s biggest engineering firm, said he’s “cautiously optimistic” about Congress enacting an infrastructure bill in 2018 but is disappointed that it didn’t happen this year.

Despite the “headwinds and political turmoil,” Macquarie Infrastructure and Real Assets remains hopeful a proposal will emerge in 2018 because there is political constituency for it from across the political spectrum, Managing Director David Agnew said in a statement.

One problem is how to treat states and localities that have already raised money for projects so they’re not disadvantaged in the competition for federal funding, said Jim Tymon, chief operating officer of the American Association of State Highway and Transportation Officials in Washington.

Gas Taxes

Twenty-six states have raised or adjusted their motor-fuel tax rates and other fees during the past five years, and voters in 20 states approved $4.2 billion in new and continued funding for infrastructure in Nov. 7 ballot issues alone, according to the American Road & Transportation Builders Association.

The White House official said entities that raised revenues over time would get credit in the process, as will those that take action in 2018 instead of waiting for a federal bill.

The Trump Administration has also said a major element of its plan will be streamlining environmental reviews and permitting for projects, vowing to reduce the time it takes to get approvals to about two years.

Peter DeFazio (D-OR), the top Democrat on the House Transportation and Infrastructure Committee said, “there have been previous streamlining initiatives that have not yet been implemented, and it would be a mistake to focus on streamlining when more funding is needed.” He said the initiative is already at risk because it has been delayed so long.

Still, infrastructure has always been a bipartisan issue, and there has not been this type of discussion about infrastructure at the federal level in decades.

 

Canada-U.S. Trade Deal Possible If NAFTA Fails, Trudeau Says

Canadian Prime Minister Justin Trudeau said he would consider one-on-one talks with the U.S. on trade, if negotiations to update the North American Free Trade Agreement fail.

The prime minister, who was in the southern Chinese city of Guangzhou to wrap up a five-day visit, said the 23-year-old NAFTA “needs to be updated” and warned that canceling the pact would harm Canadians. His comments followed the unexpected breakdown in Canada’s efforts to launch free-trade talks with China, with officials saying the two sides would continue discussions.

While Prime Minister Trudeau reaffirmed his desire to save NAFTA, which underpins $1.2 trillion of trade, his comments will likely fuel speculation that Canada is preparing to move ahead without Mexico. The remarks come just weeks after other members of the Trans-Pacific Partnership criticized Canada for upending efforts to resurrect the trade pact without the U.S.

Very Confident

The Canadian government has repeatedly said it was committed to working with Mexico to renew NAFTA, but officials have sometimes signaled a willingness to consider a two-way pact of the kind U.S. President Trump prefers. President Trump has threatened to scrap NAFTA, if the other two signatories don’t accept proposals that the Trump administration argues will reduce U.S. trade deficits.

“We’re still very confident in the kinds of support and response that we’ve gotten from friends, partners, colleagues in the U.S. who recognize that trade is a powerful driver of growth and benefit to citizens,” Trudeau said Thursday, December 8.

Canada and the U.S. had a bilateral trade deal that was superseded and suspended by NAFTA. Canada’s chief NAFTA negotiator told lawmakers this week that the old agreement would kick in again if NAFTA failed, although it would have to be re-implemented.

China Talks

Starting talks with China could strengthen Trudeau’s hand in NAFTA negotiations, demonstrating that the U.S.’s second-largest trading partner has other options. But a personal visit to Beijing — the second in as many years for Trudeau — wasn’t enough to overcome Chinese concerns about the “progressive” trade provisions Canada insists must be part of any deal.

In 2012, former Prime Minister Stephen Harper imposed restrictions on the acquisition of oil-sands companies by SOEs after Cnooc Ltd. bought Nexen Inc., of Calgary. Trudeau said the Chinese government’s involvement in strategic industries was “characteristic of their approach.”

Next Steps

It appears that Trudeau would be leaving China without a breakthrough. Trade Minister Francois-Philippe Champagne spent two extra days in Beijing to pursue talks about the eventual framework of the agreement with Chinese Commerce Minister Zhong Shan and other officials, a Canadian government spokesman said.

Champagne was expected to head back to Ottawa with Prime Minister Trudeau on Thursday, December 7 evening, as the Liberal government regroups on its next trade move.

 

Travel Ban Hits New Court Challenge

On Monday, Decmeber4, a divided U.S. Supreme Court let President Trump’s travel ban take full effect while legal challenges go forward. The legal battle over President Trump’s travel ban resumes Friday, December 8, in Richmond, Virginia, after a pit stop in Seattle, on an inevitable path back to the U.S. Supreme Court in Washington.

The Trump Administration attorneys are set to ask a panel of judges at a regional appeals court to uphold the Sunday, September 24, proclamation that restricted travel to the U.S. from six nations — Chad, Iran, Libya, Somalia, Venezuela and Yemen — and blocked entry entirely from Syria and North Korea.

As the bi-coastal appeals courts did with earlier versions of the travel ban, they are again weighing the President’s prerogative to control policy on national security against allegations that the executive order exceeds his authority under federal immigration law and violates the U.S. Constitution by targeting people from Muslim countries.

This time is different because the Supreme Court ruled last week that the latest restrictions will remain in full effect while the appeals process plays out. While the justices did not explain their decision, it suggests they will ultimately allow the travel restrictions to remain in place indefinitely.

A three-judge panel of the Ninth Circuit Court of Appeals did not tip its hand Wednesday, December 6 while listening to an hour of arguments over the ban. The state of Hawaii argued that the government has not demonstrated a threat to the U.S. by allowing entry to people from the eight targeted nations, while lawyers for the president contended that the Immigration and Nationality Act gives him authority to decide which countries pose a security risk.

 

Interior Reorganization Plan Discussed, Without the Plan

A reorganization plan for the Interior Department has been sent to the White House Office of Management and Budget but has not been shared with Congress or stakeholders.

A Natural Resources subcommittee hearing was held on the Interior Department with two elements missing: the unreleased plan itself and any witnesses from Interior.

Representatives Donald McEachin (D-VA) and Raul Grijalva (D-AZ) both said the plan apparently involved the creation of 13 new regional offices and the movement of three agency headquarters out of the nation’s capital to Western locations.

The speculation, repeated at the hearing, is that headquarters of the Bureau of Land Management might be moved to Denver or some other Western city, and similar moves might be in the works for the U.S. Fish and Wildlife Service and at least one other agency.

 

Customs begins testing border wall prototypes

In October 2017, eight border wall samples were erected in San Diego. U.S. Customs and Border Protection (CBP) has now started the process of testing prototypes for a wall along the southwest U.S. border. Physical tests of the wall started on Monday and include testing of the samples includes efforts to scale or breach the walls, using tools such as jackhammers and saws.

The samples mark CPB’s first efforts to build the wall, which was one of President Trump’s cornerstone campaign promises.

And he appears to have made the wall’s construction a priority in office. The Department of Homeland Security expedited the construction of the sample walls in August through issuing a waiver for the process.

The Department of Homeland Security reported Tuesday, December 5 in its end-of-year immigration enforcement report that the number of people turned away or caught crossing the border illegally plummeted 23.7 percent from the previous year to 526,901 in fiscal year 2017.