Friday Night Wrap-Up

Summer may officially be over, but it still feels very much like July here in DC (mostly because it’s about 197 degrees today); Congress returned to Capitol Hill on Monday, picking up where they left their negotiations over the upcoming fiscal year.

It’s a foregone conclusion at this point that a continuing resolution will be necessary to avoid a government shutdown on the first day of the new fiscal year, October 1. Prior to Congress’ early departure for the August recess in July, some lawmakers floated the idea of a six month CR that would delay final FY 2017 spending decisions until after the new Congress and the President swear into office (and right around the time the debt ceiling is set to expire).

This idea seems to have varying amounts of (seemingly dwindling) traction on Capitol Hill. However, the main driver behind the push is the House Freedom Caucus, which still feels burned by the work on appropriations, the budget, and taxes that was done very quickly at the end of calendar year 2015 without their input or support. Ideally, the House Freedom Caucus would like to entirely eliminate the Lame Duck session of Congress immediately following the election and adjourn the 114th Congress for the final time when lawmakers leave Washington for the election recess in October. Understanding that this is extremely unlikely to happen, they’ve targeted the CR as one of the main drivers of action during the Lame Duck session and are aiming to avoid quick spending decisions in December.

Senate Majority Leader Mitch McConnell (R-Ky.), who in the past had seemed somewhat open to a longer-term CR, signaled this week that he would like to move a CR that would expire on December 9 to the Senate floor as early as next week. Recognizing that a CR that expires in March was unlikely to gain enough Democratic support in the Senate to pass and, even if it did pass, would be vetoed by the President, Majority Leader McConnell made the decision to move quickly on a shorter-term bill to allow ample time for the House to work out their issues and approve a CR. Rumors are circulating of issues and Senators who could raise an objection to a CR blocking it from moving forward, though it doesn’t appear any actual plan to object has been substantiated. So, at this point, I am planning to watch for a vote on a two(ish) month CR in the Senate next week, but I will not be surprised when an issue like Zika delays it. 

Whether or not the House Freedom Caucus will cause major problems for Speaker Paul Ryan (R-Wisc.) in his attempt to pass what is (eventually) sent over by the Senate is still unclear. The position of the caucus has not changed, but appears that progress was made today in a closed-door meeting with the House Republican Conference. A shutdown during an election year is highly unlikely, especially considering that House Democrats would probably support a straight CR, but I wouldn’t rule out considerable drama and suspense leading up to the end of the fiscal year. Remember last year, even though there wasn’t much of a threat of a shutdown, House Freedom Caucus members still managed to oust Speaker John Boehner (R-Ohio) from both his Speaker position and Congress (though the jury is still out on the actual reason why he resigned).

Another complicating factor that makes a longer-term CR even more unlikely is the score the Congressional Budget Office (CBO) recently assigned to a theoretical year-long CR for FY 2017: $1.08 trillion, which is $10 billion higher than the allowable cap set by the 2015 budget deal. This is caused by several factors, mainly spending cuts (CHIMPS) from FY 2016 that do not automatically continue into FY 2017. If a long-term CR is approved, appropriators will have to either find ways to offset the additional spending, cut specific programs, or allow across the board spending cuts in order to avoid triggering the automatic sequestration that is still in place until FY 2020. The longer the CR, the more difficult offsetting that spending becomes.

To make matters more complicated, only the non-defense discretionary accounts are over the cap, not defense, so drafting any CR that would violate the FY 2017 cap would transform a simple date change in the existing appropriations law to either a much more complicated task or a huge political fight over cutting defense spending. And in election years when Congress can delay controversial decisions, the delay typically wins out.

I’m optimistic that I’ll be able to provide a very short update next week that the Senate has approved a CR that expires on December 9 , but we’ll keep you updated if anything changes throughout the week.

 Have a great weekend!!



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