WASHINGTON — The Trump administration and Congress face a trio of high-priority budget items when lawmakers return from recess in September. If they stumble, it could lead to a partial government shutdown.
Because there’s limited time on the legislative calendar before fiscal 2017 ends on Sept. 30, it’s likely lawmakers will need a short-term continuing resolution that would fund the federal government and buy time to reach a deal on 2018 appropriations.
The GOP-led Congress must also increase the borrowing limit by Sept. 29 to avert an economic meltdown, and Republican lawmakers must pass a budget to realize tax reform plans — a Republican priority with new weight since health care overhaul efforts ran aground.
As the clock runs down from Sept. 5, the day lawmakers return, a CR seems assured. When asked before the recess whether it was likely, Senate Majority Whip John Cornyn, R-Texas, said in Roll Call, “That’s what it looks like right now.”
A likely path is Congress coming to a last-minute deal in December that lumps together the debt ceiling and federal spending, with statutory budget caps eased for the defense and non-defense sides of the 2018 budget, Todd Harrison, a defense budget analyst at the Center for Strategic and International Studies, said Tuesday.
“You put Congress and the president in this position of, ‘Either you sign this one big bill and make all this happen or we end up with a default or a government shutdown,’” Harrison said.
Dancing on the debt ceiling
The most pressing item is the need to increase the United States’ $19.9 trillion debt limit to let the government continue to pay its bills. Since the government hit its borrowing cap in March, Treasury Secretary Steven Munchin has been treading water with accounting maneuvers to stave off a default he says is coming next month.
But a fight is looming as Republicans are bucking a call from the White House for a debt-limit measure without spending or policy provisions attached. The Republican Study Committee, which represents a large bloc of House Republicans, want the increase to include language that lowers future spending.
“The majority of Republicans won’t vote for a clean debt ceiling, they’ll want something that changes the trajectory on the debt, and even then you’ll lose quite a few members,” noted moderate Rep. Tom Cole, R-Okla., said in an interview Tuesday. “It’s very difficult for Republicans to come home and justify [raising] it.”
“I’m just putting out a flare to my own leadership and the administration,” said Cole, who sits on the House appropriations and budget committees. “I don’t know what it is, but it has to be something. You can’t expect Republicans because it’s a Republican administration to abandon the principals they’ve stuck to.”
On the one hand, Republicans are under pressure from conservative groups.
“Our nation’s structural deficit is driven by historically irresponsible levels of federal spending,” Heritage Action Vice President Dan Holler said in a statement Monday. “Any increase in our nation’s debt ceiling should be paired with serious spending reforms that begin reducing federal spending in real, meaningful ways.”
On the other hand, Mnuchin, with the backing of White House Budget Director Mick Mulvaney, has called on Congress to pass a debt-limit increase with no riders attached. Before the recess, Mnuchin met with Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Chuck Schumer, D-N.Y., who are said to be on board.
Mulvaney, a fiscal hawk while in Congress, has more recently said the debt ceiling “should be raised sooner, not later. The U.S. will never default on our debt. It should be raised in the simplest manner possible. Treasury Secretary Steven Mnuchin, the president and I are of one mind.”
Should Congress miss the Sept. 29 deadline and fail to raise the limit, it would be a first, and it’s unclear exactly what will happen. It’s widely believed the impact on U.S. economy and global markets would be catastrophic.
Republican leaders may have to turn to Democrats for their votes to raise the debt-limit. And Democratic leaders have already threatened they want concessions on tax reform in exchange for those votes.
Before the recess, Schumer said Democrats would oppose any tax plan that adds to the deficit, that includes cuts for the “top 1 percent” or is formed using a process called “reconciliation” to bypass a Democrats’ ability to filibuster.
But Harrison said he believes the debt ceiling is so important that, one, Democrats will be unwilling to truly hold it hostage and, two, linking it to 2018 might create the pressure needed to force a bipartisan deal on federal spending.
If the debt ceiling was breached, it would be up to the Treasury Department to prioritize debt payments. That’s uncharted territory, meaning it’s unclear how and under what authority payments would be prioritized, Harrison said.
“I don’t think folks in Congress want to go there, especially given this administration, because it puts so much in the administration‘s hands, quite frankly,” Harrison said. “If anything, Republicans can use the debt ceiling as leverage against Democrats to push through a deal that’s more to their liking and more heavily weighted towards defense. For now, I don‘t know that Democrats have the leverage.”
Budget barriers
Congressional Republicans are under the gun to pass a budget with so-called reconciliation instructions because that, in turn, would enable a tax overhaul to pass in the Senate with a simple majority.
But it’s late in the budget-writing season and neither the Senate nor the House has passed a budget. House action has been held up by a battle between moderates and conservatives over whether to pair spending cuts with the filibuster-proof tax measure. Senate action has been on hold while the House struggles.
“You need to get a budget passed, you’re not going to get tax reform without it,” Cole said.
Congressional budgets are otherwise nonbinding, and if lawmakers don’t pass one, the consequences would largely be political. Republicans risk finishing out the year having failed on tax and health-care reform despite controlling the White House and Congress.
Cole acknowledged that the Republican loss on health care has sapped momentum for tax reform. “And if we don’t pass tax reform, the political consequences will be tremendous. That imperative probably helps us get there,” he said.
Spending showdown
No agreement on overall spending bills, plus looming fights on a border wall and defense spending add up to an impasse that threatens to shut the government down.
The House last month passed a $788 billion package of four national security appropriations bills that contained nearly $1.6 billion in funding for a wall along the U.S.-Mexico border. President Trump has made the wall a priority, but to Democrats, and some Republicans, it’s a deal-breaker.
Cole said the border funds would only rebuild 70 miles of barriers.
“It would be a shame if people jacked up the rhetoric here,” he said. “The Democrats are calling it a wall, when it’s not, and frankly, the administration is calling it a wall and it’s not.”
The plan in the House is to hold a vote on the four bills, with the eight others, when Congress returns in September. The Senate has advanced only half of its appropriations bills out of committee and has yet to mark up a defense appropriations bill.
On defense spending, lawmakers will have to bridge a House-passed proposal for $584.2 billion in base programs and $73.9 billion in war funds, and a Senate placeholder bill which has $551 billion in base programs and $82.1 billion in war funds. Both exceed the statutory budget caps, which means they would require a deal with Senate Democrats to change the law.
Republican defense hawks want to lift a cap on Pentagon spending while Democrats are pressing for more money for domestic programs.
“If you think you’re going to get defense spending [that House budget hawks want] — and I think it’s an appropriate amount — you’re going to have to do something on the non-defense discretionary side to increase the caps,” Cole said. “A lot of our people won’t like it, but there’s no way around it. You’re either going to accept a much lower number on defense or you’ll come to a deal with Democrats.”
The X-factor is President Trump and his veto power. Stung by a deal on a 2017 budget in April that stripped border wall funding and which Democrats claimed as a victory, Trump fired off a frustrated tweet hinting he might be open to a “‘good’ shutdown” if he did not get his way.
The Associated Press contributed to this report.
Joe Gould was the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He had previously served as Congress reporter.
