OUTLOOK 2017: Unusually Busy Year Ahead for Budgeteers

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By Jonathan Nicholson

After years of small-scale budget fights that resembled hand-to-hand combat more than a “grand bargain,” 2017 is shaping up to be potentially a crucial year in fiscal policy.

In 2007, the debt-to-gross domestic product percentage, a measure of the government’s debt burden, stood at 35.2 percent. By 2012, after the recession and global financial crisis and a sluggish economic recovery, it had almost doubled to 70.4 percent.

In January 2001, the nonpartisan Congressional Budget Office had projected the debt-to-GDP ratio to fall to 4.8 percent in 2011, if the surpluses then projected continued to be used to pay off debt. Then came the 2001 and 2003 tax cuts, as well as the wars in Iraq and Afghanistan.

With planned revamps by Republicans of the health-care and tax systems, decisions in 2017 could easily provide the same kind of fiscal inflection point as the recession, tax cuts and wars did. At the least, it will be a change of pace from the pattern of end-of-year, tweak-to-annual-spending-caps deals seen recently that have left both Republicans and Democrats dissatisfied.

Action Starts Jan. 3

In addition to health-care and tax overhauls, there probably will be a changing of the guard in House Budget Committee leadership as well as continued efforts on both sides of the Capitol to make the budget process less cumbersome.

The action will start as early as Jan. 3, when the Senate comes back into session to begin the 115th Congress and start the ball rolling on Republican efforts to roll back the Affordable Care Act. Senate Majority Leader Mitch McConnell (R-Ky.) has said taking up a budget resolution that will lay the groundwork for repealing the ACA will be the Senate’s first order of business.

Whether there will be a committee markup of the budget resolution is unclear. Skipping the Senate Budget Committee would be a clear change from regular order and probably invite Democratic criticism. According to a senior Democratic aide, Democrats are challenging Republican assertions that the 1974 Congressional Budget Act allows the GOP to bring a fiscal 2017 budget resolution directly to the Senate floor. In the Republicans’ view, a prohibition against doing so expired in April 2016. Democrats say the authority does not extend into 2017.

The aide said the debate may not be resolved until Jan. 3, when the Senate parliamentarian could be forced to rule on the issue. If Democrats win, it could throw a small wrench into Republican plans to move the budget as quickly as possible by forcing a markup in committee, which would be subject to notice requirements.

Spokesmen for McConnell and Senate Budget Committee Republicans declined to say whether the committee would be bypassed. Budget Chairman Mike Enzi (R-Wyo.) said Dec. 6 that his intent is to move two budget resolutions through the Senate in 2017, though he demurred when asked if that meant both would go through his committee.

The first resolution in January is expected to be a bare-bones affair meant as a vehicle to carry instructions to Senate committees to reduce the deficit by a nominal amount—maybe $1 billion—and then lead them to revive legislation vetoed by President Barack Obama in January 2016 to repeal the health-care law.

If the House agrees to the budget resolution, that follow-on repeal legislation could be advanced quickly. Republicans have been skeptical that they could move the repeal in time for it to be signed by incoming President Donald Trump on his first day in office, but they hope it would be soon afterward.

That schedule also probably means House Republicans, instead of writing their own budget resolution, would probably just bring whatever resolution is adopted in the Senate to the House floor for a vote.

Filibuster by Amendment?

While a budget resolution can be adopted on a simple majority vote in the Senate and can’t be filibustered, Senate Democrats are mulling a strategy considered and rejected by then-Sen. Judd Gregg (R-N.H.) when he was the ranking member on the Senate Budget Committee in opposition to health-care legislation: a filibuster by amendment.

While there is usually a marathon session of rapid-fire votes that last well past midnight at the end of budget consideration—a process dubbed vote-a-rama—Democrats are mulling whether to extend that further by offering a continual stream of amendments to put off a final vote as long as possible. The strategy could also be used on the follow-on reconciliation bills.

“That is something that is being discussed. There are people of various minds at the staff level,” the Democratic aide said. Often such amendments are paired with GOP alternatives, meaning Democrats—like Republicans—would be exposed to potentially politically troublesome votes. And the move could distract from Democrats’ message that if Republicans repeal the ACA, they should be responsible for passing its replacement.

Two other budget issues could come to the fore in January: the confirmation process for Rep. Mick Mulvaney (R-S.C.) to be the next director of the Office of Management and Budget; and the Congressional Budget Office’s annual budget and economic outlook, which traditionally is released near the end of the month. No dates for confirmation hearings on Mulvaney had been announced by either the Senate Budget Committee or the other committee with jurisdiction, the Homeland Security and Governmental Affairs Committee, as of late December.

New Faces on House Side

Meanwhile, in the House, new faces likely will wield the Budget Committee gavel and sit in the ranking member’s chair. The current chairman, Rep. Tom Price (R-Ga.), has been tapped by Trump to run the Health and Human Services Department. If confirmed, that would open up a potential race for the chair.

Rep. Todd Rokita (R-Ind.), the current vice chairman, has thrown his hat in the ring. Another panel member, Rep. Diane Black (R-Tenn.), has left the door open to a run, telling Bloomberg BNA it is premature to say, pending the Price confirmation process.

On the Democratic side, Rep. John Yarmuth (Ky.) will take over as ranking member from Chris Van Hollen (D-Md.), who was elected to the Senate.

In an interview with Bloomberg BNA, Yarmuth said Democrats intend to say Republican proposals once thought unlikely to become law now could be signed by Trump.

“Republicans are going to have to consider the fact that the policies they promote are policies that could become law, which is not where they’ve been at the last six years,” Yarmuth said. In the past, Republicans “could propose the most extreme ideas, throw meat to their base and never have to worry about the consequences.

“So, now when they’re proposing legislation, whether it’s tax reform or health care or immigration or whatever it is, we can illuminate the consequences of those policies for the average American with the very real prospect it will happen.”

‘Come on Down.’

The spring will bring work on the second budget resolution, this time for fiscal 2018 if the first is for 2017. While April 15 serves as the usual target date to get a budget adopted in both chambers, this year will see it either adopted early or, more likely, pushed back a few weeks, thanks to unfinished appropriations and the calendar.

With both chambers out of session in the middle two weeks of April for religious holidays, Republicans would have to get the budget adopted in the April 3 week to meet the April 15 date. But doing that may be difficult, as the current bill funding the government expires on April 28, only a few days after lawmakers return from the break. Ensuring government funding continues will likely be the higher priority for leadership than working on the budget resolution, which could push the latter to May for final action.

Bill Hoagland, a former long-time Republican budget staffer and currently senior vice president of the Bipartisan Policy Center, said Republican difficulties in passing the health-care repeal reconciliation bill or a new government-funding bill could be an opportunity for Trump to cut a deal with Democrats.

“That would be the time for the president to say, ‘Come on down, let’s make a deal,’ ” Hoagland said. “The man’s a dealmaker. He claims he is.”

Debt Limit, Again

Democrats could gain a bit of leverage in the late summer or early fall, as the Treasury Department exhausts its “extraordinary measures” to not breach the congressionally set debt limit. The limit has been suspended since 2015 but that suspension ends in mid-March. Treasury’s accounting moves are expected to bring it additional room under the debt limit before it tells Congress it risks a default on U.S. debt.

It’s unclear how Republicans intend to deal with the debt limit, which has in the past often been suspended with support only from Democrats. Both Enzi and Price have endorsed the idea of linking the debt limit to a debt-to-GDP ratio. Hard-liners in the House Freedom Caucus have said any additional borrowing room should be tied to major changes in the budget.

Enzi and Price raised the debt-to-GDP target possibility as they fleshed out their ideas for overhauling the federal budget process. Staffers for both said in November that the pair intended to push their ideas in 2017, though Price took a more comprehensive approach to the overhaul. Whether Price’s successor will keep Price’s blueprint is unclear. Also unclear is whether the process will be advanced on a piecemeal basis as the two budget resolutions wind their way through Congress, or instead pushed after the resolutions are dealt with.

To contact the reporter on this story: Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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