New Year, Old Budget, New Riders (Jan. 5)

All indicators suggest that Democrats are gearing up for a fight. Will the party that was so averse to attaching riders to spending bills during the Obama era play hardball with the budget?  Or are some riders better than others?  More below.

Keep warm and have a good weekend,

Dana

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Topline FY 18 Figures

Both Democrats and Republicans agree that the first order of business will be to raise the FY 18 $549.1 billion defense and $515.7 billion non-defense Budget Control Act (BCA) caps, and to possibly pay for some of these increases with spending cuts. Each party is concerned by the BCA’s severity: last year’s FY 17 appropriations totaled $601 for defense and $614 for non-defense discretionary spending.  Republicans hope to raise caps and slash domestic spending to expand funding to the military.  Democrats insist on a spending deal which matches defense spending and non-defense domestic spending dollar for dollar.

The budget resolution passed by Congressional Republicans in the fall sets a topline FY 18 discretionary budget authority at $621.5 billion for defense and at $510.7 billion for nondefense discretionary. This is broadly in line with the Trump administration’s call for a two-year budget that would increase military spending by about $100 billion. Republicans were able to pass their own budget resolution for tax reform, but with respect to appropriations, Democrats wield more leverage to negotiate.
Still on Obama’s Budget 

The GOP may have claimed its first legislative victory with the Tax Cuts and Jobs Act, but a year into Trump’s presidency, the country is still operating with an Obama-era budget. The budget process is rife with arcana and it’s not uncommon for a new administration to take some time to get spending priorities in place. A delay this long, however, suggests an administration unprepared to pass fundamental (and legally required) legislation and, perhaps, one surprised to be in the White House at all.

With the midterm elections just now appearing around the corner, Republicans have walked themselves into a corner by relying so heavily on Continuing Resolutions (CRs) — already relying on three in FY 18.  Democratic leverage over budget negotiations increases with each kick of the can. With another shutdown looming on January 19, both parties are bracing for a fight.

If Tuesday’s letter from Nancy Pelosi is any indication, she and Senate Majority Leader Schumer plan to stick with the dollar-for-dollar demand, though this will enrage Republican fiscal hawks shaking off their post-tax reform deficit amnesia which settled over the GOP during the tax fever this fall. Failure to agree could yet force a government shutdown, sending markets reeling and subjecting federal workers to a furlough.
More Than Just a Budget Fight 

The Democrats’ leverage comes primarily from the fact that, unlike with the tax bill, Republicans need Democratic votes if they are going to avoid the embarrassment of a government shutdown. A sizable number of House GOP members will likely vote against the spending bill, so GOP leadership need Democrats’ votes to pass the bill. In the Senate, the Republicans’ razor-thin 51-49 majority leaves them vulnerable to a Democratic filibuster that would require 60 votes to overcome.

Pelosi’s letter implies the Democrats are prepared  to go to the mat to fund programs which Republicans have neglected in pursuit of tax reform. These include:

• CHIP — The Children’s Health Insurance Program ran out of funding at the end of last September. Before the holidays, Congress extended CHIP funding through the end of March, but child advocates are concerned funding could be depleted by then and are pushing for a five year extension.  Nine million American children rely on the program, particularly in families who earn too much to qualify for Medicaid, but too little to afford quality health insurance. The House passed a long-term CHIP appropriation in November that paid for the program by cutting health spending elsewhere, but Democrats rejected it as insufficient.
• DACA — Don’t expect much action on the budget without relief for children brought illegally to the U.S. who have benefited (up until now) from the Deferred Action for Childhood Arrivals program that President Trump would end.  Many progressive Democrats were furious with leadership for passing December’s spending bill without getting relief for DACA recipients. Thousands of protesters descended on Capitol Hill in December to demand on the passage of the Dream Act.  Nearly two hundred protesters, including two members of Congress, were arrested on the Capitol steps. With several important Republicans voicing support for Dreamers, and progressive Democrats out of patience, it appears that the time has come for Democratic leadership to dig in its heals.
• Other Democratic Priorities — While CHIP funding and DACA relief are the two most politically contentious items up for negotiation, Pelosi’s letter highlighted several other Democratic priorities. These included: new spending for veterans programs; disaster relief; National Institutes of Health; the opioid crisis; and the reinforcement for faltering state, local, and private pension plans.

While it’s unlikely that we’ll see all of these Democrat priorities addressed, it’s certainly clear the negotiation docket is full. That leaves negotiators precious little time to come to consensus before the December 21st CR expires in 15 days.
Next Steps: Long Term or CR?

All indications are that, even if a budget deal can be agreed to, Congress will have to pass another short-term spending measure to avoid a shutdown on January 19.  Rep. Tom Cole, long-time leading GOP budget-maker, was quoted as saying that he, “didn’t think you have have a choice but to think about another CR” until negotiations are concluded.  With so few session days before Jan. 19 and so many items under negotiation, this may as well be an announcement of the fourth CR in as many months. Cole expects an extension, quite likely through Presidents’ Day, February 19.

If an extension is forthcoming, Democrats will likely want to attach their preferred legislation to the CR. Democrats have long decried Republican use of poison pill riders — attachments purposely designed to make a bill unpassable. Given the Democrats’ leverage at the negotiating table, as Republicans don’t have the votes, progressive attachments are unlikely to kill any extension.