As we noted at the end of our last weekly column, we intend to write on a monthly basis to outline what to expect in Congress for the next month. Here we present the first such column.
Members of Congress will return to Washington, D.C. this week for a four-week work period before the scheduled Fourth of July recess. Many of the same issues that absorbed congressional attention during the first five months of the year will continue to dominate the June agenda on Capitol Hill as the Republican majority in each chamber attempts to make progress on several priorities — healthcare reform, tax reform, nominations, and the Fiscal Year 2018 appropriations process.
First among these priorities is legislation to repeal and replace the Affordable Care Act (ACA). Despite the Memorial Day recess last week, press reports indicated that Senate staff were working to develop healthcare reform legislation as a substitute for the controversial House bill, the American Health Care Act (AHCA), which narrowly passed that chamber in May. Even when passing the bill, House members understood that it was the first step in a long process and that their bill was not going to get considered on the Senate floor. Before the Memorial Day recess, the Senate GOP leadership set up a 13-member Special Working Group to develop an alternative to the AHCA that could pass the Senate. The Working Group’s discussions reportedly provided enough of a groundwork for the staff of three key Senate Committees (Budget, Health, Education, Labor and Pensions (HELP), and Finance Committees) to huddle with leadership staff over the break to begin to develop new legislation for the Senate to consider. Despite the progress, even Majority Leader Mitch McConnell noted prior to Memorial Day that he did not yet see a path to 50 votes in favor of a bill.
One element guiding the drafting process in the Senate is the recently released Congressional Budget Office (CBO) score of the House bill. The CBO estimated that the AHCA would cause 23 million people to lose their health insurance coverage, while saving the federal government $119 billion over ten years. The estimate also noted that the bill would result in increased premiums for individuals with pre-existing conditions or leave them priced out of coverage entirely. Even though Senate Republicans dismissed the House-passed AHCA, this CBO score provides the Senate with important information on the scope and impact of the House bill. Perhaps more importantly, it will guide the Senate Parliamentarian in deciding which portions of an eventual Senate bill may eventually be considered through the budget reconciliation process.
Senators involved in the legislative drafting have been careful not to prescribe any timeline or expectations to their efforts, but a discussion draft may be released to the conference in the next few weeks. Additionally, Senators Susan Collins (R-ME), Bill Cassidy (R-LA), Shelley Moore Capito (R-WV), and Johnny Isakson (R-GA) introduced their own replacement plan for the ACA, the Patient Freedom Act of 2017, which could provide an alternative vehicle for the Senate to consider if the Working Group discussions do not yield a viable bill.
Republicans in both chambers are also expected to pursue tax reform during June in order to deliver on another major campaign promise from the 2016 election cycle. The Trump Administration has yet to present its detailed plan for tax reform, but key congressional committees are moving forward. The chief tax-writing committee of the House, the Ways and Means Committee, will likely continue its series of hearings on tax reform proposals over the next four weeks. The Ways and Means Committee has convened two such hearings so far: one on tax reform policies to promote economic growth and a second on border adjustment and international tax modernization. Members of the Senate Finance Committee are reportedly preparing to develop their own legislation by examining previous legislative tax reform proposals, especially one developed by former Ways and Means Committee Chairman Dave Camp (R-MI).
As with the health care reform legislation, key policy differences have pushed back the initial goal set by the White House and GOP congressional leaders for swift passage of tax reform legislation. One of the major obstacles is identifying methods of raising revenue to pay for the very ambitious reductions in tax rates that Republicans have pledged to attain. House Republican leadership has identified three revenue-raising proposals in their “Better Way” agenda: the elimination of all itemized deductions except the mortgage interest deduction and the charitable contribution deduction; the elimination of the deduction for business interest expenses; and a border adjustment tax (BAT). Each of the three House leadership proposals has been met with criticism, particularly from members of the Senate, but the BAT remains the most controversial component of House leadership’s plans for comprehensive tax reform. Even though it is supported by House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady (R-TX), a number of key Republicans have expressed concerns, including Senate Majority Leader McConnell, who has stated publicly “It probably wouldn’t pass the Senate.” Administration officials have been careful thus far not to oppose the BAT explicitly, though their comments have generally revealed skepticism towards it.
In addition to the identification of “pay fors” to offset tax cuts, Republican leadership will have to devise a legislative path forward for any tax reform legislation once it is drafted. Given the slim majority Republicans hold in the Senate, GOP leadership would need the procedural vehicle of reconciliation in order to prevent a Democratic filibuster of the legislation, allowing the bill to pass by a simple majority rather than the standard 60-vote threshold. These reconciliation instructions would have to come from a budget resolution, adopted by Congress, for FY 2018. However, both chambers have yet to pass a budget resolution for FY 2018. This failure is due to the fact that once a new budget resolution is adopted, the prior budget resolution may no longer be used for reconciliation. Because the FY 2017 budget reconciliation bill is needed to carry the Republicans’ health care reform bill, Congress cannot move ahead with the FY 2018 budget resolution until health care reform is resolved. Republicans leadership has also been aiming to resolve health care reform so that any FY 2018 budget resolution could rely on cost savings from the repeal of the ACA. In addition to the health care debate slowing down the tax reform process, there remain intra-conference disputes among Republicans over fiscal allocations and spending limits for defense and non-defense accounts, which also have the potential to derail passage of a FY 2018 budget resolution.
The challenges of developing and passing a budget resolution for FY 2018 have given rise to some discussion of trying to make tax reform a bipartisan effort that could garner the 60 votes that would be needed to advance a bill in the Senate outside of the reconciliation process. There are reports of bipartisan conversations taking place, but it is unclear how serious they are. The current political climate would probably push congressional leaders in both parties to discourage such efforts across the aisle in order to produce a tax reform bill that can enjoy sufficient bipartisan support to overcome the 60-vote threshold in the Senate, and the inability thus far of the President to broaden his base of support, at least as revealed by polling data, provides Democratic leaders with the arguments to keep their members in line. Therefore, observers view these nascent efforts as unlikely to succeed, and recent reports that Speaker Paul Ryan has been telling Republicans that he wants to work out a tax reform bill with the Senate and the White House in private only confirm that observation.
The inability to move forward on a budget resolution setting the spending parameters for the next fiscal year is also affecting the annual appropriations process. The House and Senate Appropriations Committees are initiating their work on the 12 annual appropriations measures following the release of the President’s budget request on May 23, but the process is well behind schedule after Congress struggled to complete work on FY 2017 spending. Several lawmakers have already conceded that it is effectively impossible to pass 12 individual appropriations bills through both chambers before the start of the new fiscal year on October 1. House Republicans are reportedly floating the idea of bundling all 12 of the bills into an omnibus measure, to be presented for a single vote on the House floor before the August recess. Even if House Republicans can reach the lofty goal of completing work on an omnibus bill with conservative funding priorities in an unusually short time frame, the measure would likely be dead on arrival in the Senate, where the GOP majority would need the support of several Democratic members in order to consider the legislation. Therefore a compromise bill is more likely to result for FY 2018 if the GOP majority wants to avoid a government shutdown this fall, which would be a major distraction from other legislative priorities and a number of authorization deadlines that are also set to expire at the end of the fiscal year.
To further challenge members as they return to Capitol Hill, Treasury Secretary Mnuchin announced last week that due to a decline in federal tax receipts, the debt limit will need to be raised prior to the August recess, instead of in September, when a vote had previously been expected. Secretary Mnuchin urged Congress to pass a clean debt-ceiling increase, but soon thereafter Office of Management and Budget Director Mick Mulvaney urged his former congressional colleagues to attach spending reductions to any debt-ceiling increase. This split within the senior ranks of the administration is not unusual, as each is pursuing the role appropriate to the position he holds, but it presages a debate that is likely among Republicans on Capitol Hill. This debate over coming weeks will no doubt make both intra- and inter-party relations in both chambers even more fraught.
On top of these contentious matters, the inquiries into the administration and the President’s campaign and transition regarding dealings with Russia continue on and off Capitol Hill. The House and Senate Intelligence Committees have been investigating Russian meddling in the 2016 presidential election, while the House Oversight and Government Reform Committee and the Senate Intelligence Committee are investigating former National Security Advisor Michael Flynn. Also being scrutinized are allegations that the President sought to stop the FBI from investigating General Flynn. Deputy Attorney General Rod Rosenstein appointed retired FBI Director Robert Mueller as special counsel to supervise a separate Justice Department investigation into any potential ties between the Trump 2016 presidential campaign and Russia. Another part of these inquiries involves a review of the efforts of Obama National Security Advisor Susan Rice to review intelligence regarding the Trump campaign. These inquiries all have the potential to overtake legislative business and media attention on Capitol Hill. Former FBI Director James Comey is expected to testify publicly before the Senate Intelligence Committee this week, on June 8. The day before, June 7, Deputy Attorney General Rosenstein will be testifying with other senior intelligence officials in the Senate Intelligence Committee as well on renewing the surveillance authorities that expire at the end of the year, though it is unlikely senators will confine their questions to that legislative topic. The House Intelligence Committee inquiry is itself in disarray after the Committee chairman, Devin Nunes (R-CA), who had recused himself after admitting to contacts with White House officials over the inquiry, was found to have signed off on subpoenas recently issued by the Committee.
While these various high-profile policy, oversight and strategy questions will garner most of the attention on Capitol Hill in June, there are several items ready for floor consideration in the House and Senate this month.
The House is expected to take up H.R. 10, the “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act of 2017 (CHOICE Act), championed by Financial Services Committee Chairman Jeb Hensarling (R-TX). H.R. 10 would amend the Dodd-Frank Wall Street Reform and Consumer Protection Act and other laws governing regulation of the financial industry, including a repeal of the Volcker Rule’s restrictions on certain speculative investments by banks. The bill also would repeal the Federal Deposit Insurance Corporation’s authority to use the Orderly Liquidation Fund and would allow financial institutions, under certain circumstances, to be exempt from a variety of regulations. The bill removes the Financial Stability Oversight Council’s authority to designate non-bank financial institutions and financial market utilities as “systemically important” (also known as “too big to fail”). H.R. 10 would make numerous other changes to the authorities of the agencies that regulate the financial industry, and it would change how the operations of the National Credit Union Administration (NCUA) and Consumer Financial Protection Bureau (CFPB) are funded. The bill passed the Financial Services Committee in early May by a party-line 34-26 vote. It was held up over a debate involving whether to repeal the cap on fees credit card companies can charge retailers. Although a repeal of those limits was included in the bill as reported, a whip check of the Republican Conference revealed insufficient support for the provision; as a result, the bill that will come to the House floor for a vote will not include that provision, a big win for retail interests.
Financial Services Committee Chairman Jeb Hensarling is also readying legislation to reauthorize the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency (FEMA). The current program, set to expire on September 30, has been under intense scrutiny following its handling of claims following Superstorm Sandy in 2012 and a ballooning $24 billion debt. Numerous members have called for reforms to the program. In early May, the Financial Services Committee released a draft proposal that would reauthorize the program for five years and contains provisions aimed at improving its financial stability and increasing its reserve fund. The proposal also aims to provide for greater consumer affordability by lowering the cap on annual rate increases from 18 percent to 15 percent and allows for reforms to the flood mapping process, a tool that assists in determining risk. A draft reform bill has also been released by Senators Bill Cassidy (R-LA) and Kirsten Gillibrand (D-NY), but would provide for a 10-year NFIP reauthorization, which Rep. Emmanuel Cleaver (D-MO), ranking member of the relevant Financial Services Subcommittee, has also endorsed. Swift action will be necessary once an agreement can be reached on legislation in order for FEMA to continue writing policies beyond September 30.
The House Energy and Commerce Committee is poised to move legislation reauthorizing the Food and Drug Administration (FDA) user fee agreements during this work period, readying a bill for floor consideration. H.R. 2430, the FDA Reauthorization Act, sponsored by Energy and Commerce Committee Chairman Greg Walden (R-OR) would renew and enhance the four FDA drug, medical device, biosimilar and generic drug user fee agreements. The current agreements are set to expire on September 30. The Senate companion bill, S. 934, passed the Senate Health, Education, Labor and Pensions Committee in early May on a bipartisan basis and is ready for floor consideration, as well. The FDA has indicated it may begin noticing layoffs if new agreements are not enacted prior to the August recess, which could result in a delay of the review of drugs and devices by the agency, but policymakers have been working in a bipartisan fashion and appear committed to a timely reauthorization.
On the other side of the Capitol, the Senate is expected to continue moving nominations over the next four weeks, as it has been doing since the President’s inauguration. The consideration of sub-Cabinet level appointees to various agencies will carry on as individuals are reported out of respective Senate committees, as well as a number of judicial appointees to the federal court system as they are considered by the Senate Judiciary Committee. Democrats are continuing a pattern of slow-walking almost all nominees and opposing many as a bloc, even those who in previous administrations would have garnered little or no opposition and likely would have been approved by voice vote or unanimous consent. Energized by an angry base, Democrats remain torn between playing to that base by reflexively opposing anything out of the administration and trying to get some things accomplished. The President’s rejection last week of the Paris climate agreement is likely only to strengthen the hands of Democrats in both chambers who want to continue to oppose any administration proposal, and that outcome does not bode well for expediting the pace of confirmations, which lag well behind previous rates.
Majority Leader McConnell has identified reforms to the Department of Veterans Affairs (VA) as a top priority for the Senate when members return this week. Senators will consider S. 1094, the Department of Veterans Affairs Accountability and Whistleblower Protection Act, bipartisan legislation introduced by Veterans Affairs Committee Chairman Johnny Isakson (R-GA), Ranking Member Jon Tester (D-WY), and Senator Marco Rubio (R-FL). S. 1094 would modify administrative and personnel procedures of the VA and reorganize the Office of Accountability and Whistleblower Protection. The reforms would modify civil service protections at the VA, allowing supervisors to remove, demote, or suspend employees for poor conduct or performance and provide expanded protections for whistleblowers. The legislation passed the committee unanimously in May by a voice vote and is similar to a proposal passed by the House of Representatives earlier this year. The legislation also follows an Executive Order issued by President Trump in April creating a new Office of Accountability and Whistleblower Protection at the VA.
The Senate may also take up a measure to strengthen sanctions against Iran. The Foreign Relations Committee reported legislation on May 25 to tighten sanctions against Iran in response to a number of activities being conducted by the regime, including ballistic missile tests. The bill would impose mandatory sanctions on individuals involved in Iran’s ballistic missile program and arms transfers, and would allow for terrorism sanctions to be applied to members of the Iranian Revolutionary Guard. The sanctions measure passed the committee by a vote of 18-3, with Senator Rand Paul (R-KY) being the only “no” vote among Republicans on the committee, readying the legislation for consideration by the full Senate in June. There are ongoing efforts from a bipartisan group of Senators, led by Senators Lindsey Graham (R-SC) and John McCain (R-AZ) to attach Russian sanctions to the measure, as a penalty for its meddling in the 2016 presidential election, as well as its ongoing operations in Ukraine and Syria. The push for Russian sanctions could come in the form of an amendment to the Iran sanctions bill on the Senate floor, or as separate legislation through another relevant Senate Committee, such as the Banking or Armed Services Committees. Democrats, seizing on the allegations of Russian interference in the 2016 elections and the coziness between some Trump campaign advisors and Russian interests, have indicated that enhanced Russia sanctions will be the price for their support of any Iran sanctions bill, despite the bipartisan vote in committee.
One final item to note when discussing the June calendar is the end of the Supreme Court’s term. There has been a lively parlor game around speculation that a retirement announcement may be imminent for Justice Anthony Kennedy, who has been a critical swing vote on the Court. So far, Justice Kennedy has not commented on his plans beyond the end of this term, but Senator Charles Grassley, Chairman of the Judiciary Committee, and President Trump have both acknowledged the retirement rumors for a member of the Court. Such an announcement would create a second vacancy for President Trump to fill early in his Presidency, and could solidify a conservative lean to the Supreme Court for decades. A Supreme Court vacancy could also slow the work of the Senate if the chamber has to consider another appointment, which it would likely do in September, which is already looking to be an extraordinarily busy month. Before then, however, Congress has two months of work to do ahead of its annual August recess. We will return in early July, around the July 4 recess, to preview what is likely on Capitol Hill in the month leading up to that break.