Corkey-Toomey Resolution Deal (Sep. 22)

On a busy week in Washington that ended early for the holidays for many, Sens. Corker and Toomey announced a “compromise” agreement on a Senate budget resolution with a top line $1.5 trillion in deficit spending over ten years, to accommodate reconciliation instructions on a tax bill.  And maybe health care legislation.   Or both.

The House Ways and Means Committee plans to meet on Sunday and Monday to negotiate tax differences.  Next Wednesday, Republicans will retreat away from Capitol Hill to coordinate the plan.   Details of the Corker-Toomey arrangement remain sparse, but passing this resolution is the difference between needing 51 and 60 votes to pass major tax legislation this year.  Today’s Friday night fight pits GOP Deficit Hawks vs. the Dynamic Scorers, who will emerge victorious — what’s the over/under?  See under.

Good weekends all,

Dana

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The agreement struck this week between Sens. Corker and Toomey calls for $1.5 trillion in deficit spending to clear room for tax cuts.  The budget resolution also outlines reconciliation parameters, confirming the preemption that Republicans plan to take a partisan route in large-scale tax legislation.  But disagreement persists within the GOP about how much deficit-financed tax cuts can be tolerated.  But the sides are not so far apart that the budget resolution deadline of midnight on September 30 cannot be met.

By including reconciliation guidelines in the budget resolution for tax reform, the Senate can pass tax cuts with a simple majority (51 votes, if everyone participates).  With 52 Republicans in the chamber, a few GOP Senators strongly attached to the idea of revenue neutrality could block the $1.5 trillion agreement.

Comments throughout the week by Senate Finance Chair Hatch suggest that he and the Republicans on his Committee plan on pursuing tax reform independently from President Trump’s plan to develop a tax reform bill through the “Big Six” White House and Congressional leaders process.

Hatch (who is himself a member of the Big Six) around-ended these plans, reasserting Senatorial prerogative and regular order in the legislative process in the bargain.  Revenue neutrality, once a unifying rallying cry for the GOP, is yielding to deficit financing this year, it appears.

Passage of the budget resolution in the Senate is far from guaranteed.  Even getting a tax amendment out of the Finance Committee, where Hatch has a slim two-vote majority, is not a given. Sens. Corker and Toomey may have agreed on a budget resolution, but the extent to which other Senate deficit hawks are convinced about the merits of deficit-financed tax cuts is unclear — and an even greater challenge awaits the bill on the Senate floor where it will be met by numerous amendments from other lawmakers.

The ball will soon be in the House’s court.  The Ways and Means Committee is meeting late on Sunday and will take all day Monday to try to reconcile the GOP’s internal differences.  Will House Republicans insist on tax cuts that are paid for by spending cuts, or will they give in to the pressure to cut taxes and increase the national debt?  Speaker Ryan recently backed away from insisting tax reform would not add to the deficit. While he may be inclined to support this arrangement, the Senate principles may still not garner enough House support.

Where are the Votes?  Check the House

The House has already faced obstacles in generating its own budget resolution.  Diane Black, House Budget Chair, passed her budget with reconciliation instructions through committee on July 21, but has not yet been able to attract enough support to pass it on the House floor.  As many as 30 moderates are thought to oppose the plan.  The House Freedom Caucus, with about as many members — enough to kill any House GOP proposal — threatened Black’s resolution in hopes to win more spending cuts.

If the Caucus is true to its fiscal responsibility creed, members of the group may vote against a proposal similar to the Senate compromise.  The Senate GOP conference is far more unified than its House counter-party.  Whatever the divisions in the conference — represented supposedly by  Sens. Bob Corker, fiscal hawk, and Toomey the tax cut cheerleader — the steeper challenge is in the House, where the Freedom Caucus can block the $1.5 trillion deficit “opening compromise” from Corker and Toomey.  We predicted last month the final compromise would be closer to the $1 trillion over 10 year range.  Looking like a good bet