After months of talk, speculation and behind-the-scenes negotiations, the Republican tax reform proposal is expected to be released to the public this week. It is likely to remain at the forefront of legislative business during this November work period. The stakes surrounding it are very high; failure to pass the bill could have many effects, not the least of which is putting at risk the Republican majorities in both houses of Congress in the 2018 elections.
Last week, the GOP took a crucial procedural step forward when the House of Representatives passed the Senate Fiscal Year 2018 budget resolution by a vote of 216-212. Final approval of the budget blueprint by both chambers allows the Republican conference to begin in earnest the legislative process for a tax reform measure that reportedly could cut taxes by as much as $1.5 trillion over the next decade, and for eventual passage of a tax-reform bill without any Democratic support.
Republican congressional leaders and the President are not wasting any time or momentum after passage of the budget resolution and have established an ambitious timeline for consideration of the tax legislation. House Ways and Means Committee Chairman Kevin Brady (R-TX) is expected to unveil the tax bill on November 1. The Ways and Means Committee plans to mark the bill up during the week of November 6. House leaders plan to bring the bill to the floor during the week of November 13, prior to the scheduled Thanksgiving holiday recess. The Senate Finance Committee plans to release its version of the bill during the week of November 13, likely following House passage of its bill. The Senate Finance Committee reportedly plans to hold its markup during the week of November 27, after which the full Senate would take up its tax reform measure in early December. Assuming both chambers succeed in passing their respective versions of the bill, they would proceed to conference to reconcile the two bills, and a final package negotiated by both chambers could be approved before the end of the year.
Actually legislating reforms to the complicated tax code may take longer than this accelerated timeline, and the narrow 216-212 House budget resolution vote is a sign of how difficult the negotiations may be within the Republican conference. The GOP lost 20 Republican votes on final passage of the Senate budget resolution, many of the members from high-tax states who have expressed concerns the tax reform plan will eliminate or severely circumscribe the current deduction for state and local taxes, resulting in higher overall taxes for their constituents. They argue that their states are already donor states (sending more in taxes to the federal government than they receive back) and their constituents should not bear this added burden. Another dispute over the yet-to-be-released tax bill involves contributions to retirement savings accounts. Republican margins in both chambers are extremely narrow and leaders will have their hands full in the coming weeks trying to balance the interests of each member and his or her constituency, while trying to stick to their goal of major tax reform before the end of the year.
Beyond the push for tax reform in November, Republican leaders are staring down a major fiscal deadline set for Friday, December 8: the expiration of continuing appropriations keeping the government running in FY 2018. The strategy for avoiding a government shutdown has not been shared publicly, but the passage of the FY 2018 budget resolution by both chambers sets the stage for negotiations over discretionary spending levels and the limits established by the 2011 Budget Control Act (BCA). Even though the FY 2018 budget resolution adheres to the spending caps mandated by the BCA, it includes a provision that allows the House and Senate Budget Committees to adjust those caps in the event separate legislation is passed to revise the BCA limits for defense and non-defense discretionary spending. Democrats are expected to wield significant influence in these fiscal discussions, because any eventual legislation adjusting spending caps and authorizing spending will likely need Democratic support.
Democrats have also indicated they intend to exert their influence over spending negotiations to secure a resolution of the ongoing debate over the Deferred Action for Childhood Arrivals (DACA) program. The DACA program, established by President Obama, allowed persons who were brought to the country illegally by their parents when they were children to remain in the country and work, serve in the armed forces, or attend school. The Trump Administration announced in September that it will end the program in March 2018 because it lacked congressional authorization. The delay in terminating the program is designed to give Congress a chance to enact legislation to authorize a similar program. Speaker of the House Paul Ryan has formed a Republican working group in the House to develop a proposal on the issue, and Senate Republicans have also reportedly established a working group to draft their approach. Speaker Ryan reportedly told some members of the House Republican Conference that a DACA fix will be included in the appropriations bill the House will consider before December 8; Democrats have indicated they will withhold their support for any appropriations bill that does not include protection for DACA beneficiaries. While public support for DACA beneficiaries is widespread, there are sharp differences over whether and how to authorize the program by law and whether to include border security and various enhanced immigration enforcement authorities in a DACA legislative package without alienating support from either party.
In reportedly telling some of his members that DACA will be addressed in the appropriations bill, Speaker Ryan also is reported to have told his members that the issue of restoring cost-sharing subsidy payments under the Affordable Care Act (ACA) will not be addressed in that vehicle. The President decided in October to end the cost-sharing reduction payments that helped to subsidize the health-insurance policies available under the ACA. Congressional Republicans are trying to determine a path forward on the issue. Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) have introduced a bipartisan bill to restore the payments for two years. Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ways & Means Chairman Brady have proposed their own approach, which is more conservative. Resolution is a salient issue for the future of President Obama’s signature domestic achievement, especially during the upcoming ACA open-enrollment period. Because of the focus on tax reform, however, it is dubious any resolution of the issue will be achievable in November. Along with these ACA-related issues, Congress will need to renew the Children’s Health Insurance Program (CHIP), which expired at the end of September. While the program continues to function, many states are now running out of money for it, so renewal of the program is priority. The House plans to consider its version of a bill to renew CHIP this week, although in the face of Democratic opposition to some of its offset provisions used to pay for the renewal, that bill is unlikely to garner sufficient support to pass the Senate. Further talks will be needed to resolve the issue, even as states run out of funding for the program.
Compounding the challenges presented by these fiscal debates is disaster relief. The White House has indicated that Congress should expect a request in November for a third round of disaster aid for communities affected by Hurricanes Harvey, Irma and Maria and western wildfires. White House Budget Director Mick Mulvaney recently indicated that damage assessments are ongoing and additional disaster-relief requests will follow their completion. He also proposed that Congress consider reducing spending elsewhere in order to offset the unbudgeted amounts that will be necessary for disaster aid. Whether that offset suggestion becomes an administration demand is unclear, but if so it is likely to be highly controversial.
Behind the scenes, leaders of the Armed Services Committees are optimistic of concluding conference committee negotiations on the FY 2018 National Defense Authorization Act. The annual authorization bill sets Department of Defense policy and authorizes Pentagon spending levels for the year ahead. In July, the House passed a $696 billion bill while the Senate passed a $700 billion package in mid-September. Aside from their marginally different topline allocations, the House and Senate bills diverge slightly on policy and when passed by their respective chambers both exceed some of the budget and capability levels requested by President Trump. Despite these differences, House Armed Services Committee Chairman Mac Thornberry (R-TX) has expressed optimism that the differences will be resolved in short order. His Senate counterpart, Chairman John McCain (R-AZ), has expressed his view that a conference report could be finished in “days.” A resulting conference report must be passed by both chambers before being sent to the President for signature.
Also during this work period, both chambers are expected to continue discussions related to the expiring surveillance authority of Section 702 of the Foreign Intelligence Surveillance Act. The authority, which expires at the end of the year, is considered by the intelligence community to be a pillar of U.S. counter-terrorism efforts. The program is, however, controversial with privacy and civil liberties advocates, and the debate surrounding the surveillance reauthorization divides Members in both parties. Some Republicans have joined calls from the Trump Administration to make a reauthorization permanent, while others, including privacy hawks, liberal Democrats and conservative Republicans alike, want to incorporate additional civil liberties protections before renewing the program. Senators Rand Paul (R-KY) and Ron Wyden (D-OR) and a bipartisan group of House lawmakers have introduced legislation, the Uniting and Strengthening America by Reforming and Improving the Government’s High-Tech Surveillance (USA RIGHTS) Act, that would add privacy protections under Section 702, to better prevent communications made by American citizens from being swept up under the program and maintains the sunset clause, with a requirement for congressional reauthorization every four years. The House Judiciary Committee released a bipartisan bill in early October, the USA Liberty Act, which would reauthorize the program for six years while attempting to strengthen civil liberty protections with new reporting requirements for intelligence officials. And just last week the Senate Intelligence Committee quietly advanced its own measure 12-3 during a closed markup. This Intelligence Committee proposal would extend Section 702 authority through 2025. Although final action is not expected until December, this month will be important in trying to reach enough of a consensus to find a path forward among the competing perspectives on the issue.
Related to national security issues, the Senate is likely to consider whether to impose new sanctions against North Korea and Iran. The Senate is expected to take up the Otto Warmbier North Korea Nuclear Sanctions Act (H.R. 3898), passed by the House last week by a vote of 415-2. The legislation would direct the U.S. Treasury Department to ban U.S. financial institutions from engaging in transactions that benefit people or entities associated with the North Korean government and authorizes the U.S. government to suspend financial assistance to any foreign governments that knowingly fail to prevent financial transactions that benefit the North Korean regime. Also last week, the House passed several sanctions bills in response to Iran’s ballistic missile program, which the Senate may also take up during this work period. This legislative response comes just two weeks after President Trump refused to certify that Iran is meeting the terms of the multilateral agreement negotiated to curb its nuclear program, and instructed Congress to strengthen the law that governs U.S. participation in the deal. This action by the President initiated a 60-day clock for Congress to re-impose sanctions on Iran’s nuclear program that were lifted under the international nuclear agreement, but congressional leaders are first focusing on imposing non-nuclear penalties. The House-passed legislation would expand upon a sanctions package signed into law in July and would require the Administration to create an implementation plan. This bill also would impose additional sanctions on individuals or entities that help Iran develop ballistic missiles and other conventional weapons. Another portion of the sanctions package would require the President to report to Congress on the Iranian and international supply chain for Iran’s ballistic missile program and to impose sanctions on the individuals and entities that support it, both inside and outside Tehran. Other measures target Hezbollah, the Lebanese Shiite terrorist organization, Iran’s proxy army in the Syria, and entities that support it the terrorist organization.
In addition to these matters, the Senate is starting the month by spending a week on confirming four circuit court nominees. With the Democrats having eliminated the filibuster for nominations during President Obama’s term, they have no prospect of preventing these nominees from being confirmed. The Senate is expected to continue its consideration of other judicial and executive nominees throughout the month during periods in between floor consideration of legislation.