DC braces for another legislative deadline

Ho hum, the government’s spending authority will expire on Friday (March 23) unless previously extended. Experience suggests, however, that a government shutdown is unlikely.

Overall discretionary spending levels for fiscal years 2018 (and also 2019) were established by the Bipartisan Budget Act (BPBA) signed by the president on February 9, but many details remain to be resolved in the omnibus appropriations bill (OAB) for fiscal year 2018 that will be unveiled early this week.

The basic question is how to divide the spending levels for appropriation categories among the host of agencies/programs that are competing for funding. Also, the OAB may authorize the spending of even more money (never mind that the government’s gross debt just hit $21T, up over $1T in the last 14 months).

*If agreement is reached about setting up a congressionally authorized replacement for the Deferred Action for Childhood Arrivals (DACA) program, it would presumably include iron-clad arrangements to fund the southern border “wall” that the president has demanded. Trump is reportedly open to an immigration deal – without most of his previous demands [there have been indications of willingness to forget about ending the visa diversity lottery and limiting chain migration], Jacob Pramuk, cnbc.com,
3/14/18.

*Some members of Congress are seeking additional subsidies for the GovCare program that Republicans tried and failed to “repeal and replace” last year. Get your shutdown clocks ready, Susan Ferrechio, Washington Examiner,
3/17/18.

Also, as is typical with “must-pass” legislation, numerous policy riders have been proposed by enterprising legislators seeking approval of favored projects. In addition to DACA and healthcare, the list includes gun controls, Planned Parenthood, Russian meddling, environmental issues, Trump properties, campaign finance laws, tax law fixes, and Puerto Rico aid. 10 policy issues to watch in omnibus spending bill, Ryan McCrimmon, rollcall.com,
3/5/18.

Many of the riders will be nixed on grounds that their inclusion might fuel enough opposition to sink the OAB, but some will make it through the legislative gauntlet. Recall the many extraneous matters dealt with in the BPBA, notably revival of dozens of business tax preferences that should have been allowed to expire. More shutdown drama, mediocre results,
2/12/18.

There isn’t much reliable information about the negotiations taking place behind the scenes. Americans have been kept far better informed about political scandals of the day, such as “chaos” at the White House, Russia-related investigations, and the Stormy Daniels drama.

What’s wrong with this picture, and how could things be done better?

I. Deficiencies – Presenting bills that run hundreds of pages, often covering a multitude of subjects, is inherently troublesome – particularly if the text of such mega bills is only made available a day or so before a “must-pass” deadline. Shorter bills, limited to logically-related subjects and provided on a timely basis, might stand a better chance of being thoughtfully debated.

The mega bills keep coming, however, while the flow of other legislation of substance (excludes bills of symbolic significance, such as naming buildings) seems to be drying up. Paper weight, Christopher Beam, slate.com,
8/20/09.

Over the last several decades, the number of bills passed by Congress has declined: In 1948, Congress passed 906 bills. In 2006, it passed only 482. At the same time, the total number of pages of legislation has gone up from slightly more than 2,000 pages in 1948 to more than 7,000 pages in 2006. (The average bill length increased over the same period from 2.5 pages to 15.2 pages.)

Mr. Bream attributes this mega bill trend primarily to delaying tactics that are fueled by partisanship. If so, isn’t this contrary to the public’s interest in a transparent and responsive legislative process?
Ibid.

Bills are getting longer because they're getting harder to pass. Increased partisanship over the years has meant that the minority party is willing to do anything it can to block legislation—adding amendments, filibustering, or otherwise stalling the lawmaking process. As a result, the majority party feels the need to pack as much meat into a bill as it can—otherwise, the provisions might never get through.

The mega bill trend isn’t just a matter of tactics; it also affects the substance of the legislation that gets enacted. Proposals to address controversial issues tend to drop by the wayside, this isn’t the right time to deal with that folks, while the trading of special interest favors flourishes. Some examples follow.

#GOVCARE – The BPBA included a rider to repeal the tax (actually a fine) for failure to comply with the individual mandate for GovCare, but this change (for reasons we don’t profess to understand) won’t take effect until 2019. For tax year 2018, the IRS will be charged with enforcing a tax that has been repealed and millions of Americans will be liable for the tax if they don’t choose to purchase qualifying healthcare insurance coverage at the applicable price. Fifty-eight percent of those paying this tax earn $50,000 or less annually.

Whatever one thinks about GovCare overall, such a result seems anomalous, especially when a rider in the OAB could fix the situation. How Congress can kill the individual mandate penalty for this tax year, Robert Moffit, dailysignal.com,
2/27/18.

Mr. Moffit’s proposal seems eminently reasonable, but the politics involved are toxic. A stand-alone bill would never fly, and don’t expect a rider in the OAB either.

#GRAIN GLITCH – Under the Republican tax bill that was enacted last December without a single Democratic vote, farmers selling grain to cooperatives were given a deduction for 20% of the resulting revenue versus 20% of their net income on the grain. This would give these farmers an advantage over those who don’t sell to cooperatives. “In some cases, farmers could have wiped out their entire taxable income,” which was presumably not intended by the drafters of the legislation.

Such a tax rule would upset the current balance in the farming industry and create an artificial incentive to organize new cooperatives for farmers who haven’t traditionally used them. Intensive discussions among the interested parties resulted in a proposal on how to fix the problem. The changes could be reflected by a rider in the OAB, and most of the interested parties are on board. Lawmakers, farm groups outline fix for tax conundrum, Jacob Bunge, Wall Street Journal,
3/14/18.

The economics underlying the planned legislation “have been analyzed and reanalyzed in excruciating detail,” said Randy Gordon, chief executive of the National Grain and Feed Association, an industry group representing both grain companies and farm cooperatives. The NGFA and the National Council of Farmer Cooperatives on Tuesday both blessed the solution. Another group, the National Farmers Union, called on Congress to reject the proposal on grounds that the new cooperative provision was an attempt to level the playing field for cooperative businesses versus corporations.

We don’t know much about the grain business, but this proposal seems to represent a commendable attempt to fix a drafting error in the tax bill. Barring some perceived benefit from siding with the NFU, the current minority party will probably be willing to go along. However, a quid pro quo may be required to secure their cooperation.

Democratic support for fixes to the Republican tax bill could be construed as showing some degree of buy-in, so don’t expect a slew of fixes in the OAB. The current minority party’s main play will be some sort of proposal to raise taxes for the affluent, reduce the corporate tax rate cut, and increase government spending for infrastructure without raising motor fuel taxes. Senate Democrats pitch repeal of tax cuts to fund infrastructure, Toby Eckert, politico.com,
3/7/18.

#STATE TAXES ON THE INTERNET – State and local tax authorities have long yearned to impose sales taxes on internet sales to residents, even if the sellers don’t have a physical or contractual presence in the state that would provide a nexus for taxation under the traditional rules. Most large internet sellers have effectively conceded the point to avoid litigation, but sales taxes are still not being collected by smaller firms in many cases.

Sooner or later, sales taxes will be applied, but it matters how this is done. Smaller firms aren’t well equipped to deal with the myriad of tax rules and rates that could apply to their internet business, and the compliance headaches could be substantial. Hence, like many knotty issues, this one has been repeatedly deferred. Now some members of Congress (predominantly Republicans) would like to include a rider in the OAB to break the deadlock and claim credit for being responsive to state needs. The GOP’s internet tax, Wall Street Journal,
3/15/18.

A large faction of House Republicans are pressing GOP leaders to attach legislation to the omnibus spending bill that would let states collect sales tax from remote online retailers. South Dakota Rep. Kristi Noem’s legislation, which has 50 co-sponsors, would let some 12,000 jurisdictions conscript out-of-state retailers into collecting sales and use taxes from their customers. A bipartisan companion bill in the Senate has 27 co-sponsors.

The WSJ editorial calls the idea of inserting such a basic policy change “inside a huge spending bill with little debate” a “political scam.” Also, “raising taxes on small business and consumers won’t be a good look for Republicans in November, nor an inducement for investment and growth.”

SAFE reached a similar conclusion about a “Marketplace Fairness Act” that was passed by the Senate five years ago, but eventually died in the House. Again, in that case, there was an effort to sneak through a proposal without taking the trouble to thoroughly review it. Congress in action: Internet sales tax bill,
5/13/13.

. . . before Congress takes final action, we would urge that some previously noted points be addressed: (a) consider Senator Wyden’s concern about the continued exemption of foreign sellers; (b) cut Indian tribes out of the administrative action (sorry Senator Reid); (c) index the $1 million annual exemption for inflation; (d) consider a single blended sales tax rate for each state in order to reduce the compliance burden.

In sum, the internet sales tax case (good politics, dicey policy) is the reverse of the grain glitch case (good policy, dicey politics).

#SANCTUARY CITIES – Administration attempts to withhold federal funds to jurisdictions that aren’t cooperating with federal immigration enforcement efforts would face formidable legal challenges. Republicans came out ahead in a Texas case, but winning in California might prove tough. The government’s case could be greatly strengthened by supporting it in the congressional authorization of funds. So why not cover the point explicitly in the OAB?

Emotions about immigration enforcement are running high, however, and the political blowback against a defunding provision would be intense – probably triggering a government shutdown with a good chance that Republicans would be blamed. Despite demands of House conservatives, e.g., Rep. Mark Meadows (R-NC), we doubt Republicans will take the gamble. Omnibus unlikely to defund “sanctuary” cities, Camila Dechalus, rollcall.com,
3/13/18.

“I don’t think it’s going to happen in the Senate. I mean Congressman Meadows may feel like that is a good idea but practically speaking that will be really difficult to get done,” Senate Homeland Security Appropriations Subcommittee Chairman John Boozman, R-Ark., said in an interview.

II. Suggestions – One way or the other, the OAB will be settled soon. After that there may not be any further “must-pass” bills until December, which probably means Congress won’t be passing much legislation for the next few months.

True, Congress should – according to its own budget procedures – complete all 12 of its appropriation bills for FY 2019 by the end of September. No need for continuing resolutions, omnibus appropriation bills, etc., which have served to distort the legislative process in the manner described in Section I. The September 30 deadline hasn’t been met for a long time, however, and Congress isn’t likely to meet it this year.

Meanwhile, the Joint Select Committee on Budget and Appropriation Process Reform will be conducting a review of applicable procedures in this area. The JSC’s findings and recommendations (including legislative language) are due by November 30.

The 16 members of the JSC have been appointed, with the co-chairs to be House Budget Committee Chairman Steve Womack (R-AR) and House Appropriations Committee Ranking Member Nita Lowey (D-NY). Note that the Senate will not be represented at the helm, which is consistent with our understanding that the BPBA provided for this review at the request of House Speaker Paul Ryan. Joint Select Committee on Budget Process Reform to begin its work, budget.house/gov,
3/6/18.

The first meeting of the BP Committee on March 8 was apparently a “meet and greet” affair, but note the correction of the group’s title in the second press release. Evidently congressional appropriators will expect to be accorded equal status with budgeters in the review. Joint Select Committee on Budget and Appropriation Process Reform holds first meeting, budget.house.gov,
3/8/18.

On March 9, the Bipartisan Policy Center (finding actionable solutions since 2007) offered its suggestions for this review. BPC proposals for the [JSC], Jason Grumet, bipartisanpolicy.org,
3/9/18.

In general, the BPC encouraged the JSC to think inside the box. Your recommendations should be expert-based, bipartisan and long-term oriented. With a November 30 reporting deadline, you should focus on just a few ideas (notably transitioning to a biennial budget process and making the budget committees into a leadership committee populated by representatives of the fiscal, tax, economic, and appropriation committees). Never mind the goal of the budgeting process, there’s no time for that, focus on minimizing the risk of any more government shutdowns (e.g., by providing for automatic increases to the debt ceiling until Congress gets around to acting). And please know that the BPC “offers and stands ready to assist the committee in this important work.”

SAFE’s suggestions for maximizing the value of this review have been previously reported. In general, our ideas differ substantially from those of the BPC. Let’s make the budget process work, Section V,
2/19/18.

*Start by defining the budget goal, which should be to balance the budget as soon as possible and keep it that way. Without a clear goal, the review is doomed to fail.

*Recognize that presidential leadership is needed for an effective budget process; 535 members of Congress, responsible only to their respective supporters, cannot do this job on their own. Tinkering with congressional procedures is simply not enough.

*Demonstrate a sense of sense of urgency by calling for immediate and targeted (never mind budget caps, etc.) cuts in discretionary spending. See hit lists of the president’s budget staff, Citizens Against Government Waste, Heritage Foundation, etc., which are readily available.

*At the same time, push for a systematic overhaul of the government’s entitlement programs so they will be affordable over the longer term.

*If such recommendations can’t command 60 votes in the Senate, then abolish the Senate filibuster rule so a simple majority will suffice.

To date, SAFE has not reached out to members of JSC (they were only appointed recently). We have, however, sent letters to various key players including House Speaker Paul Ryan and Budget Director Mick Mulvaney. SAFE to DC: Please fix this problem,
2/26/18.

As the JSC does its work, SAFE will follow the details of the review that are made publicly available and contact JSC members when this seems appropriate, much as we did re the Fiscal Commission in 2010 and the Joint Select Committee for Deficit Reduction in 2011.

To be continued . . .
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