Oops, that's not what was supposed to happen

. . . in business as in war practically nothing goes according
to plan. Strategy dissolves when the first bullet is fired.
Mark Fuller,
1993.

Before the members of Congress returned to DC last week, much had been written about actions that would be needed to maintain the flow of government spending: [A] Raise the debt ceiling to prevent a default – [B] pass a government spending package by September 30 to avoid a government shutdown - [C] reauthorize funding for the Children’s Health[care] Insurance Program.

Also on the radar screen were [D] a budget resolution, [E] tax reform, [F] an infrastructure package, and [G] renewing the effort to overhaul GovCare, although these issues were characterized as “supplemental matters on the Republican agenda” versus must dos. Everything Congress needs to get done this fall, Rebecca Shabad, cbsnews.com,
8/21/17.

Stir in some disturbing developments, including the need for massive disaster relief funds in the wake of two devastating hurricanes, a nuclear threat from North Korea that can no longer be safely ignored, and multiple investigations and media attacks aimed at the president and his supporters.

Acting with unexpected speed, the nation’s political leaders have already kicked items A and B down the road (the new deadline is December 8). Action on item C seems like a sure thing; progress on tax reform and the other issues is iffy. A rundown follows.

A. Debt limit – Anyone who has been paying attention understands that the debt limit must keep being raised so long as the federal government continues to spend more money than it collects in taxes. As this periodic exercise serves no apparent purpose, we believe the debt limit should be abolished. Tighter control of government expenditures is surely needed, but can best be pursued in the budgeting/appropriation process. Fixing the fiscal problem: work on what matters, section C, 6/26/17.

Republican leaders suggested tying a debt limit increase to a down-payment ($15 billion) on hurricane relief funding, their reasoning being that few members of Congress would want to vote against this popular measure even if they weren’t enthusiastic about appearing to accept rising debt. The proposal was to suspend the debt limit for 18 months (until safely after the mid-term elections).

Democratic leaders were willing to support a debt limit increase, thereby ensuring its passage, but only for 3 months (until December). In the course of a bipartisan meeting at the White House, the Republicans offered to settle for a 6-month extension, but the Democrats wouldn’t budge. The president sided with the Democrats – to the reported dismay of Republican leaders. CNN: GOP “shell shocked” Trump voted with Dems on debt, Greg Richter, newsmax.com,
9/6/17.

The president’s decision seems logical. It was high time to raise the debt limit (as the administration has been requesting since April) rather than dragging the matter out until the last minute (supposedly September 29), especially considering all the other issues that were waiting to be addressed. With two devastating hurricanes to contend with, a “bipartisan moment” would have public appeal. And this deal would facilitate a pivot to tax reform, which the president and others saw as a major opportunity.

The Senate incorporated the terms of the deal in an amendment to a previously approved House bill, the House passed the amended bill by a wide margin (even though 90 Republicans voted “no”), and the president made it official. Trump signs emergency disaster bill, keeps govt. open through December, David Sherfinski & Tom Howell, Washington Times,
9/8/17.

By the way, the president and Senate Minority Leader Chuck Schumer have reportedly endorsed the idea of abolishing the debt limit (perhaps they have been reading the SAFE blog, ha ha), which would negate the significance of suspending it for only three months on this go-round. Trump, Schumer agree to pursue plan to repeal the debt ceiling, Damian Paletta & Ashley Parker, Washington Post,
9/7/17.

B. Spending authority – The other part of the fiscal deal was to provide spending authority until December, thereby averting the specter of a government shutdown. This may set the stage for an omnibus spending bill in December, which would predictably tend to extend the funding of all government programs without any serious efforts to curb wasteful spending. Too bad, but there wasn’t enough time left to consider and pass all the annual appropriation bills in September so a continuing resolution (CR) was unavoidable.

To make the best of things, Congress should now complete the appropriation bills on a systematic basis instead of waiting until December to take further action. Is this likely to happen? There is good news and bad news.

#
Good news (sort of) - The House of Representatives passed an appropriation bill for defense and national security in late July, which is awaiting action in the Senate. A second appropriation bill (the Make America Secure and Prosperous Appropriations Act) is now being worked on; it was developed by the applicable appropriation committees, covers all of the remaining government functions that are budgeted on an annual basis, and is ready for debate, consideration of proposed amendments, and a vote by the full House. Congress.gov (search for H.R. 3354).

Some conservative observers have criticized the House appropriation bills (see functional recap below) for not cutting enough wasteful spending, and we suspect properly so. House spending bill is too bloated; Congress should stick to the budget caps, Justin Bogle, Heritage.org,
9/6/17.


AppropsByAgency

Overall, there would be a 6% increase in discretionary spending from fiscal year 2017 – or a far larger increase after adding in say $200-300 billion for hurricane disaster relief.

Some nondefense functions would be cut in dollar terms, partially offsetting increases for defense, etc., but the cuts are smaller than those called for in the president’s budget prepared by the Office of Management and Budget. For example, a 30% cut in funding for the Environmental Protection Agency was reduced to an 8% cut.

Screen Shot 2017-09-10 at 1.07.31 PM

Another uncertainty is what action would be taken on the specific spending cuts that were proposed by the OMB. Pluses and minuses: assessing the president’s budget proposal, section B, 6/5/17.

Some 60 discretionary spending proposals call for the elimination of specified programs or agencies, with indicated one-year savings of $26 billion.

H.R. 3354 reportedly recommends “terminating multiple wasteful or duplicative programs,” but the specific results in this regard don’t appear to have been quantified. The Fiscal Year 2018 Consolidated Government Funding Bill, House Budget Committee,
9/6/17.

#Bad news - The Senate has yet to get serious about appropriation bills, and without Senate action (which can be blocked by filibusters) there is no way the House bills can be enacted into law. Thus, another last minute, sloppily reviewed budget deal seems likely in December, which will probably undo whatever progress the House may have made in cutting wasteful government spending.

The negative implications of such haphazard fiscal management have been underscored by our military leaders and proponents of beefing up the defense budget. [Senator] John McCain slams Congress for “failure” of another continuing resolution, Pete Kasperowicz, Washington Examiner,
9/7/17.

McCain, R-Ariz., said on the Senate floor that military leaders for years have asked for a predictable funding plan. He noted that Defense Secretary Jim Mattis told Congress this year that the Defense Department has been funded 30 times by continuing resolution in the last decade, and said these short-term fixes that don't let Congress make lasting policy changes aren't getting the job done. *** McCain also quoted [Joint Chiefs Chairman Joseph Dunford: “Without sustained, sufficient and predictable funding, I assess ... that within five years, we will lose our ability to project power, the basis of how we defend the homeland, advance U.S. interests, and meet our alliance commitments."

Point well taken, but we would suggest that leaders of the Senate should press for the systematic and timely completion of all appropriation bills (not just the one for defense). These bills should have been ready by the end of September, and they certainly should be completed and reconciled with the House appropriation bills before December.

Another point to ponder is the need to review appropriation bills carefully, because some atrocious provisions can be buried in them. Here’s a current example. Senate defense bill has provision that will nationalize intellectual property, Brian Darling, townhall.com,
9/9/17.

Technology companies invest billions to develop revolutionary new source codes. These source codes for software companies are considered the most sensitive information of a company because that is how a company makes money. The Senate version of the defense authorization bill would demand that the companies hand over source codes as a cost of doing business with the department. The provision further would set up a database where the defense department would publish the intellectual property. This is the same source codes specially designed to protect the United States national security from ISIS and nations who are intent on harming us. 

C. Children’s Healthcare Insurance Program – It’s hard to imagine Congress failing to renew this popular entitlement program, and the matter is reportedly well in hand. [Senators] Orrin Hatch, Ron Wyden signal long Senate reauthorization for [CHIP]. Washington Examiner, 9/7/17.

D. Budget resolution – The House budget outline (Building a Better America) for fiscal year 2018 was approved by the House Budget Committee in a mid-July, and could serve as the basis for a House budget resolution in connection with plans to approve a tax bill in the Senate via the reconciliation process (and thereby avoid the filibuster rule). Let’s hear it for the SAFE budget, 8/21/17.

If a tax bill materializes in the next several weeks, a House budget resolution will no doubt be approved and sent to the Senate as planned. An approved budget for fiscal year 2018 is no longer needed from the standpoint of controlling spending (the presumed purpose of a budget), however, as the detailed appropriation bills that are nearing completion would supersede it.

E. Tax reform – Our last entry discussed the prospects for tax reform, including numerous questions about the arguments of proponents (notably the president in a Springfield, Missouri speech) and opponents (e.g., most Senate Democrats) of such legislation. Republicans pivot to tax reform, 9/4/17.

The president gave a second tax speech last week, in Bismarck, North Dakota. He again offered four general principles for the package being developed (this time giving a clearer explanation of the fourth point about the taxation of international operations of US corporations – maybe someone really is reading the SAFE blog), without much in the way of supporting details Transcript,
9/8/17.

In the wake of the president’s decision to agree with Democrats about extension of the debt limit, there has been much speculation as to whether he may also be looking for deals in other areas – such as tax reform. Trump defends legislative deal with Democrats, Louise Radnofsky, Wall Street Journal,
9/8/17.

The White House has said it was open to crafting a bipartisan tax deal, though Sen. Mitch McConnell, the Senate majority leader, has said the two parties’ priorities are so far apart he would pursue a tax bill with only Republican votes. On Friday, Mr. Trump wrote on Twitter: “Republicans must start the Tax Reform/Tax Cut legislation ASAP. Don’t wait until the end of September. Needed now more than ever. Hurry!”

Who knows, we can’t claim much success in predicting what the president will do next, but it might be noted that he addressed remarks to Senator Claire McCaskill (D-MO) at the first tax speech, and to Senator Heidi Heitkamp (D-ND) (who was present) at the second one. Also, his latest pitch for tax reform (weekly address,
September 8) was devoid of partisan references.

My administration is working closely with Congress to develop a plan that will deliver more jobs, higher pay, and lower taxes for businesses of all sizes and most importantly for Middle Class families all across America.

Furthermore, some Senate Republicans would prefer to reach across the aisle on taxes – falling back on the reconciliation process only if necessary. Republicans will try to win over Democrats on tax reform, Joseph Lawler, Washington Examiner,
9/10/17.

Sen. John Cornyn of Texas, the Republican whip, said this week that his party would first attempt a bipartisan tax reform before turning to the reconciliation tool. "[W]e'll also pass a budget resolution to get reconciliation instructions as a fallback, but we're going to try," he said, according to the Wall Street Journal.

Sen. Pat Roberts, R-Kan., a member of the Finance committee, also said Republicans should pursue both courses. Asked if they could attempt such an outreach and still pass legislation in 2017, he simply responded, "we'll see."

The real question, however, is not whether the president would be willing to work with congressional Democrats on taxes, but whether they would have any receptivity to the type of tax reform he has been touting, e.g., (1) “lower taxes for businesses of all sizes” including, as he stated in his North Dakota speech, “millions of sole proprietors, LLCs, and partnerships who report their income . . . on their personal tax returns,” and (2) abolition of the “death tax.”

Bear in mind the uncompromising message of the Senate minority leader before the president’s Missouri speech. Schumer: Democrats are ready for a big fight over taxes, Joseph Lawler, Washington Examiner,
8/30/17.

If the yet-to-be-unveiled legislation eventually does lower taxes for the wealthy, "the American people are going to rise up against it," Schumer warned. The call was hosted by the "Not One Penny" campaign, which has launched advertisements opposing the GOP tax effort.

Crafting a tax package that would attract 60 votes (including 8 Democrats) in the Senate and still appeal to Republicans seems like a tall order. Mr. President, they are never going to like you,” Derek Hunter, townhall.com,
9/10/17.

When not calling him a white supremacist or a Nazi sympathizer, Democrats are dedicated to making sure Donald Trump and Republicans have as few legislative victories as possible in the hope of retaking Congress next year so they can ensure he gets no legislative victories and loses in 2020. They don’t want to be his friend. Moreover, their voters would punish them if they were.

Devising a tax plan that no more than two GOP senators will oppose if the reconciliation process is used doesn’t figure to be easy either, and the president won’t make the task any easier by alienating Republicans.

On balance, it’s hard to see a tax bill being passed this year. Republicans will try to win over Democrats on tax reform,
op. cit.

F. Infrastructure plan – If there’s anything the members of Congress like to do it’s spend money, so one might think the idea of spending an extra trillion dollars on roads, bridges, ports, etc. would be high on the priority list. No specific proposals have surfaced to date, however, perhaps because there is no obvious source of revenue to cover the cost – unless a new tax is proposed or some clever scheme is unveiled for off balance sheet financing. Stay tuned!

G. Healthcare – The president has continued to express disappointment about the failed effort to overhaul the government healthcare system and suggest that it might be possible to try again. Consider this remark in his North Dakota speech. Transcript, 9/8/17.

If you demand it, and if you call up people in Congress -- good people, sometimes maybe not the right intention, but good people -- Congress will deliver on it because they have no choice.  So you have to call your congressmen.  You have to call your senators.  You have to make sure that they do what they have to do.  And believe me, we haven’t given up on healthcare.  We haven’t given up on healthcare.  We never give up.

If any project isn’t a potential candidate for Democratic support, however, it is “repealing and replacing” GovCare. Moreover, the time window for using the fiscal year 2017 budget as a vehicle to pass a healthcare bill via the reconciliation process is about to close. Deadline for fast track Obamacare repeal bill expires Sept. 30, Robert King, Washington Examiner,
9/1/17.

"Now that the parliamentarian has determined that Senate Republicans cannot use reconciliation instructions to repeal the Affordable Care Act beyond this fiscal year, we need to work together to expand, not cut, healthcare for millions of Americans who desperately need it," said Sen. Bernie Sanders, I-Vt., ranking member of the Senate Budget Committee.

Three Republican senators are still working on a repeal approach, although it is obviously a long shot and might not save any money either. Republicans plot last-minute push for Obamacare repeal, Robert King, Washington Examiner,
9/7/17.

Republican Sens. Bill Cassidy of Louisiana, Lindsey Graham of South Carolina, and Dean Heller of Nevada are proposing to block grant all federal healthcare dollars for the Medicaid expansion to states, along with funds equaling the value of Obamacare tax credits. The proposal has emerged as the only Obamacare repeal bill left standing after the Senate narrowly voted down a "skinny" repeal bill in late July.

More realistically, efforts are underway to prop up the individual healthcare insurance business on government-run exchanges with more taxpayer dollars so this part of the healthcare system won’t go into a “death spiral” and collapse. [Senator] Lamar Alexander wants bipartisan fix by end of next week, Robert King, Washington Examiner,
9/6/17.




© 2017 Secure America’s Future Economy • All rights reserved • www.S-A-F-E.org