Washington Bulletin 9/4

September 5, 2017
Washington Update

On Capitol Hill

The House of Representatives and Senate are currently in recess until September 5, 2017.

 

Money Issues to Dominate as Lawmakers Face Packed Fall Agenda

Congress returns to work Tuesday, September 5 to face a crowded agenda dominated by fiscal issues, beginning with government funding and borrowing authority and ending with proposals to rewrite the tax code.

The immediate job for House Speaker Paul Ryan (R-WI) and Senate Majority Leader Mitch McConnell (R-KY) is to prevent a lapse in federal money on Saturday, September 30 by passing continuing resolution (CR) legislation that is likely to include emergency disaster relief for areas devastated by Hurricane Harvey. Also early in the new session, lawmakers must raise the federal debt limit to avoid the first default in U.S. history. The Treasury Department expects to have exhausted by early- to mid-October its tools to cover the nation’s borrowing authority.

An across-the-board CR is necessary to prevent a federal government shutdown, if none of the 12 spending bills for the new fiscal year beginning Sunday, October 1 have been sent to President Donald Trump. Republican leaders and the White House have been discussing such a bill, possibly to stretch appropriations into December.

At the same time, lawmakers are weighing whether to use that must-pass bill to extend a number of federal programs due to expire Saturday, September 30, including the National Flood Insurance Program and the Federal Aviation Administration’s (FAA) operations.

Action on a CR that might also lift or suspend the debt limit then would buy time for GOP leaders to work on other priorities, including a Defense Department authorization bill boosting Pentagon spending levels and the long-delayed fiscal 2018 budget resolution that would set the stage for the tax overhaul plan that Speaker Ryan continues to advocate.

A CR also would give leaders time to revisit the Budget Control Act (BCA) and try to strike a deal to again raise the BCA’s spending caps. Lawmakers in both parties want to increase defense and domestic spending above the cap’s levels in order to revise their appropriations bills upward and then finish them by way of a $1.1 trillion omnibus at year’s end.

Threat of Shutdown on the Rise

The challenges facing House Speaker Ryan and Senate Majority Leader McConnell to deliver on President Trump’s agenda are steadily growing. Besides the shortness of the year, relations between the President and party leaders are strained and the president is ramping up calls for a shutdown if he doesn’t get what he wants in a stopgap, beginning with $1.6 billion for a wall along the U.S.-Mexico border.

Following the President’s criticism for not finishing a health-care bill, Speaker Ryan and Senate Majority Leader McConnell are trying to move quickly on spending matters. The Speaker plans to bring an eight-bill omnibus appropriations package to the House floor the week of Tuesday, September 5 and then combine that with the four bills the House passed before the August break. If Speaker Ryan can get sufficient votes from Republicans, he plans to then send the 12-bill package on to the Senate. But Democrats have said they would block that omnibus because it exceeds the spending parameters in the BCA.

After that, attention will turn to the length and details of a CR. Passing one might not be easy, as the support of the conservative House Freedom Caucus for the leaders’ plans remains in doubt, and Democrats have signaled they won’t vote for a bill that includes border wall money.

Besides the consideration of the CR, Senator McConnell’s plan to bring the Defense Department authorization bill to the floor beginning the week after Labor Day will put spending issues front and center. Senate Armed Services Committee Chairman Senator John McCain’s (R-AZ) bid to greatly increase Pentagon spending will jump-start this fall’s negotiation over raising the BCA caps.

Other spending also could be in the mix. The President will soon ask Congress for a multibillion-dollar emergency supplemental measure to aid Texas in the aftermath of Hurricane Harvey. In addition, the President could seek money for the troop increase he wants in Afghanistan, the opioid crisis, and more.

Plans to Bring Up Budget

Spending levels also will be debated if Speaker Ryan follows through with plans to bring up the FY 2018 budget resolution in September. Senator McConnell is said to be planning to have the Senate take up the matter by early October.

Action on the budget is seen as the first step for Senate Majority Leader McConnell to bring up a tax code rewrite without having to deal with the filibuster rule. However, even advocates of comprehensive tax policy change say there isn’t enough time or consensus to undertake such an ambitious effort this year. Instead, they say, a smaller package might be the focus of the fall, including tax cuts for corporations and individuals.

The non-fiscal matters that the House may debate include an FAA reauthorization bill that would turn over air traffic control to a corporation that the bill would create. It remains unclear, though, whether there are enough votes to pass the bill.

The Senate FAA reauthorization bill does not include the air traffic control privatization language, though it has a provision on pilot training that has sparked the ire of Senate Minority Leader Charles Schumer (D-NY). Given the controversy in both chambers’ multi-year reauthorization bills, an extension of current FAA authority is expected.

 

House Leaders Plan to Omit Debt Limit Hike in Initial Harvey Aid

Republican House leaders plan to vote next week on President Trump’s expected request of about $6 billion in initial disaster relief funding for Hurricane Harvey victims, but they don’t plan to include a U.S. debt-limit increase in the legislation, according to GOP congressional aides.

That could put Republican leaders at odds with the President, whose funding request is expected to mention the need to raise the debt ceiling. Still, the letter from the White House will likely not insist on linking the aid package to an increase in federal borrowing authority or say explicitly how the Trump Administration wants congressional leaders to tackle the issue.

With House conservatives opposed to raising the debt ceiling unless they obtain concessions on federal spending, Republican leaders plan to leave the provision out of the disaster funding package. The Senate could still add an increase in legal borrowing authority when it considers the aid measure, but any change in the package would require a new vote in the House. A public plea from President Trump also could alter the position of House leaders.

The White House disaster aid request is expected to include $5.5 billion for the Federal Emergency Management Agency (FEMA) and $450 million for the Small Business Administration, Trump Administration and congressional officials said. The request is intended primarily to cover funding demands through September 30, the end of the federal fiscal year.

White House Office of Management and Budget (OMB) Director Mick Mulvaney has briefed congressional leaders of both parties on the request.

Trump Administration officials have been in talks with congressional Republicans about combining the aid with a debt-ceiling increase, an attempt to avoid a stand-off over the issue that could rattle financial markets, one of the administration officials said. Treasury Secretary Steven Mnuchin has repeatedly said that it’s “critical” that Congress raise the debt ceiling by Friday, September 29.

House Speaker Ryan told the Milwaukee Journal Sentinel, though, that Congress has until October to act on the debt limit. “We will not default,” the Wisconsin newspaper quoted Speaker Ryan as saying. “We’ve got a lot of options on our plate. We’re going to assess those options. We have until October to figure that one out.”

If the debt-limit increase isn’t included in the initial disaster funding, Congress might not act until the U.S. is on the verge of a default. The next chance to include increased borrowing authority in a broader measure would be when Congress considers a stopgap spending bill to keep the government open.

Market angst is growing as Congress has only a limited number of working days remaining to raise the debt ceiling. The spread between one- and three-month Treasury bills has shrunk to around 8 basis points from as high as 24 basis points in May as investors have started demanding higher rates on one-month paper relative to three-month securities to compensate for default risk.

The White House would like to extend the debt limit long enough to move back the threat of a default until after Congress can deal with funding for the full federal fiscal year and tax legislation the Trump Administration backs.

President Trump would like to decouple the debt limit from a potential fight in Congress over funding for a border wall that risks a government shutdown, one of the officials said.

The White House has assured Republican congressional leaders that Trump won’t pick a border wall fight during the debate over a stopgap bill needed to keep the government open past Saturday, September. 30. The President would prefer to avoid entangling the borrowing limit deliberations with a fight over the wall. That makes a confrontation more likely in December, when the stopgap bill is likely to run out.

Aftermath of Hurricane Harvey

More than 311,000 Texans had already applied for federal disaster relief funds as of the morning of Thursday, August 3o and more than $530 million already has been granted, Vice President Mike Pence stated. About 100,000 homes were damaged by the storm, White House Homeland Security Adviser Tom Bossert announced in a briefing.

As of Thursday, August 30 at 9 a.m. Easter Standard Time, the balance left in FEMA’s disaster relief fund was $2.1 billion, of which $641 million was immediately available for response and recovery efforts related to Hurricane Harvey, said Mark Peterson, a spokesman for FEMA. The Senate acted later Thursday, August 30 to free up an additional $500 million for Harvey relief.

House conservatives demand spending cuts or cost-control measures be part of any debt-limit deal.  “Why would we do a clean bill with a Republican president?” Representative Dave Brat (R-VA), a member of the conservative House Freedom Caucus, asked in an interview Wednesday, August 29. “We need some kind of fiscal reforms here.”

House Freedom Caucus Chairman Mark Meadows (R-NC) told the Washington Post on Thursday, August 30 he would oppose combining the debt-limit increase with hurricane relief.

Some conservative Republicans from Texas feel differently. Representative Blake Farenthold (R-TX), whose Texas district was impacted by the storm, said Friday, September 1 he would accept a proposal to raise the debt ceiling along with Harvey aid.

“It may have to be attached to a debt-ceiling bill, because the amount of devastation here probably will push us much closer to the debt ceiling,” he stated. “I’m not going to like it but I think they can probably throw a debt ceiling in with it and I’d vote for it.”

Treasury Secretary Mnuchin warned that additional spending on Harvey recovery could shorten the window to avert a U.S. default. “In terms of when it’s going to hit the debt ceiling, there could be some impact of a couple of days, but that would be the most,” he announced.

 

House GOP Leaders Plot Strategy to Pass Eight-Bill Omnibus First 

House Republican leaders are sifting through more than 900 amendments that lawmakers want to tack onto an eight-bill omnibus spending package when it hits the House floor the week of Tuesday, September 5.

The key to House Speaker Ryan’s strategy is said to be finding amendments to build enough GOP support to move regular spending bills through the House and offset the expected loss of Democrats’ votes. Conservatives typically oppose domestic spending bills in the package, but Democrats said they won’t support this year’s versions that deeply cut education, transportation, environmental, and other programs.

So far the House has passed only four of the 12 regular bills to fund the government before current monies run out on September 30. The House has only 12 official work days scheduled in September.

If Speaker Ryan can get the omnibus passed, it will be combined with the four-bill security “minibus” that the House passed in July. Then the 12-bill package will be sent to the Senate. Total federal spending in that package is expected to hit $1.226 trillion.

Senate Democrats are expected to challenge the omnibus for violating the Budget Control Act’s (BCA) discretionary spending caps. On the Department of Defense side, it exceeds the caps by more than $72 billion. The Senate hasn’t considered any regular spending bills on the floor this year. Measures are being readied for committee markups the first week back.
Tax Reform Tops Policy Priorities as Lawmakers Return 

Lawmakers start their fall session with a tax bill as the Republicans’ No. 1 priority. But what constitutes “tax reform” is a moving target as Republicans hash out the details among themselves.

Negotiations are happening among members of the Big Six, a group of congressional leaders and administration officials. But the closed-door meetings have yet to yield much progress publicly.

Republicans know what they want—lower corporate and individual rates and a simplified tax system that boosts economic performance. They are not sure how to get there. To determine the size and scope of the bill, lawmakers will have to come up with revenue raisers to pay for lower rates.

The state and local tax deduction and retirement tax provisions could both be revenue raisers, and industry groups are already gearing up to fight legislation that would tap those tax benefits to pay for a larger bill. Any potential revenue raiser is likely to get pushback from the affected sector.

A final product will likely include a mix of temporary and permanent tax provisions. Long-term policy is nearly universally favored, but it’s procedurally difficult using the budget reconciliation process that requires the bill be revenue-neutral over a decade.

Moving a tax reform bill this year is far from a sure thing. Congressional aides, both Republicans and Democrats, are skeptical that a deal can be made before bleeding into the 2018 midterm election season next spring.

House Speaker Ryan and Senate Majority Leader McConnell are publicly bullish that a tax bill will make it to President Trump this year. The President took to the road in late August to sell the public on the concept of tax reform.

“This is our once-in-a-generation opportunity to deliver real tax reform for everyday hardworking Americans, and I am fully committed to working with Congress to get this job done,” President Trump said Wednesday, August 30 in a Springfield, MO., speech. “And I don’t want to be disappointed by Congress, do you understand me?”

The push for tax reform will come amid a busy fall calendar. If Republicans want to pass tax legislation using budget reconciliation—as GOP lawmakers have repeatedly said they do—they will need to agree to a budget resolution. The House budget proposal could receive a floor vote in September, but is currently facing opposition from both conservative and moderate members.

Health Care Lingers

Republicans’ inability to repeal the Affordable Care Act (ACA) will likely haunt them upon their return from recess. Lawmakers left in July without delivering on that years-long promise and without a formal plan to try again.

Some senators on the Committee on Health, Education, Labor and Pensions have said they hope to find a bipartisan deal. The committee is set to hold several hearings in early September. Measures to stabilize the individual markets are one of the most promising spots for compromise. Moderate Senator Susan Collins (R-ME), one of three Republicans to vote against a bare-minimum repeal bill July 28, has said she hopes to help steer those conversations.

A plan from Republican leaders to revive a repeal bill hasn’t yet emerged. House Republicans say they are focused on tax reform, and House Ways and Means Committee Chairman Kevin Brady (R-TX) has said he wants to keep the ACA’s tax provisions out of a tax reform bill.

President Trump made waves during the recess when he prodded Senator McConnell with a series of tweets demanding the Senate leader “deliver policy wins” or step down. The needling stands in contrast to Republican lawmakers who say they need to move on, and to the White House’s previous promise to spend August pitching tax reform.

 

In the Administration

Trump’s Tax-Cut Bid Hits Obstacle: Hurricane Harvey’s Costs

Before President Trump launched his latest call for major tax cuts, he took a moment to offer support to Texas and Louisiana in the wake of Hurricane Harvey. “We are here with you today, we are with you tomorrow and we will be with you every single day after, to restore, to recover and to rebuild,” Trump pledged during a speech at a Springfield, Missouri, manufacturing plant Wednesday, August 30.

That moment revealed how the storm may add new limits to President Trump’s goal of delivering historic tax cuts. “Tax cuts not offset or at least partially offset just took a huge hit from Hurricane Harvey, although Republicans may not know it yet,” said Stan Collender, a former Senate Democratic budget aide.

Republicans in Congress, who were already tentatively planning to combine a debt-ceiling increase with a short-term spending bill to keep the government open, may now feel urgency to add Harvey-relief provisions into that mix — creating a brand-identity problem for some in the party.

“That has everything you want except Republican fiscal responsibility,” said Representative Dave Brat (R-VA) and a spending hawk. “We’ve got to help the victims of Harvey, we’ve got to raise the debt ceiling, but where is the responsibility for not leaving a fiscal mess to our children and grandchildren? That bill could come from Democrats.”

The House’s chief Democrat eagerly voiced concerns over the deficit in a response to Trump’s tax speech. “If Republicans have their way, they will blow a huge hole in the deficit, gut Medicare, Medicaid, Social Security and the Affordable Care Act — all just to fund deficit-busting tax breaks for the high-end,” House Minority Leader Nancy Pelosi (D-CA) stated.

While GOP leaders had already said that any tax plan would have to pay for its cuts with new revenue. “It will have to be revenue-neutral,” Senate Majority Leader Mitch McConnell (R-KY) said in May. “We have a $21 trillion debt.” And, Representative Peter Roskam (R-IL), who chairs the House Ways and Means Committee’s panel on tax policy, said that it’s an “open question” as to whether Congress will adhere to revenue neutrality in tax legislation.

The question is not just academic. Republicans, who have a slim 52-seat majority in the Senate, plan to pass a tax bill under a budget procedure that would allow them to bypass Democrats’ opposition. But that procedure, known as “reconciliation,” also holds that any tax cuts that add to the nation’s long-term deficit would have to be set to expire.

Treasury Secretary Steven Mnuchin has said repeatedly that temporary tax cuts are not the worst outcome. “Permanent is a lot better than temporary, and temporary is a lot better than nothing,” he said earlier this month.

In general, Trump’s Administration has tended to downplay potential budgetary effects while promising “the biggest tax cut and the largest tax reform in the history of our country.” On Wednesday, August 30, in a speech the White House billed as the first of several aimed at campaigning for a tax overhaul, the President avoided repeating the superlatives, but stuck to similar themes.

While his remarks included few specifics, the President repeated his desire to slash the corporate income tax rate to 15 percent from 35 percent. He also called for an unspecified middle class tax cut — previously, he has sought a doubling of the standard deduction, which would benefit working-class taxpayers. Together, the two provisions would cost an estimated $3.7 trillion in revenue over 10 years, according to estimates by the nonpartisan Committee for a Responsible Federal Budget (CRFB). “Congress shouldn’t be debating a deficit-increasing tax cut because our debt is at record levels,” said Maya MacGuineas, the CRFB’s president. Also, she said, the need to pay for Hurricane Harvey relief “is a reminder of why it is so important to have our fiscal house in order.”

President Trump did include one way to raise revenue in his Wednesday, August 30 speech — though he characterized it as a way to simplify the tax code: closing loopholes that benefit the wealthy. He did not specify the loopholes in question, but he drew chuckles by saying such changes would hurt his own tax planning. “Maybe we shouldn’t be doing this, but we’re doing the right thing,” said the President.

 

Trump Administration Pulls Back Wage Data Collection Form 

A controversial new form approved during the Obama Administration to identify wage discrimination has been pulled back for further review by President Trump’s chief regulatory officer.

The new form, which was strongly opposed by the U.S. Chamber of Commerce, would have required private employers with 100 or more employees to report annually to the Equal Employment Opportunity Commission (EEOC) summary pay data categorized by sex, race, and ethnicity. “We’re staying the form and we’re reviewing it, so it gives the EEOC an opportunity to decide whether they want to withdraw the form altogether or submit a revised form,” Neomi Rao, Administrator of the Office of Information and Regulatory Affairs.  The circumstances related to the collection of the data have changed and the initial cost estimates provided by the EEOC were materially in error, according to an Tuesday, August  29 memorandum sent to the EEOC.

Employers with 100 or more employees should continue to use the long-standing EEO-1 form used to gather information about race, ethnicity and gender, a senior administration official said.

The changes ordered by the Obama Administration expanded the EEO-1 form “dramatically,” the official said. Were they to go into effect, the changes would cost employers many millions of dollars and create a litigation risk, the official said.

Primarily, though, the Administration does not believe the new form would do what it is intended to do and actually collect information about wage discrimination, the official said.

Although the new form would gather a lot more information, it is not at the level of granularity that would be needed to show wage discrimination, the official said.

“The effort to prevent gender discrimination is an important public policy goal of this Administration, of state and local government, and for myself as an advocate of girls and women in business and as a former female business owner,” Linda McMahon, Administrator of the Small Business Administration, said in a statement. “That noble pursuit is harmed—not helped—by the revised EEO-1 form, which is why I support the stay and review,”

 

Chamber Shifts Focus from Obamacare Repeal to Insurance Premiums 

The influential conservative U.S. Chamber of Commerce wants Congress to authorize Affordable Care Act (ACA) payments to insurers and again delay a tax on insurers. The Chamber is shifting its focus from pushing largely for repeal of the ACA to ways to reduce health insurance premiums, Randel K. Johnson, senior vice president for the Chamber, told reporters Thursday, August 31. “We’re going to let the dust settle to figure out where we’re going to be next,” he said. “Right now, we’ve got to staunch the bleeding.”

This shift by the Chamber could reflect Congress’s agenda for September: Two Senate panels will host separate discussions of ways to improve the individual health insurance market and funding for the state-federal children’s health insurance program. Several lawmakers have said they’re eager to move on to tax reform as well.

The group wants Congress to authorize cost-sharing payments, money the government is supposed to pay insurers under ACA to reduce premiums and out-of-pocket costs for some people who buy their health insurance on the individual market. It also wants lawmakers to delay a fee on health insurance companies, often called the health insurance tax, that was created by the health law. Doing both could help reduce health insurance premiums in 2018, Johnson said.

The Chamber was a major supporter of Republican ACA repeal bills, backing the House-passed American Health Care Act and later signaling it wanted lawmakers to vote for the Senate version, which failed to pass. The group has a massive presence on Capitol Hill and has spent nearly $29 million in the first half of 2017 on lobbying for various issues, including repeal.

The group isn’t abandoning ACA repeal, Johnson said, but is focusing more on tax reform and delaying the health insurance tax this year.