Budget

The omnibus is here! And some things to clear up about congressional budget politics.

By Joshua C. Huder

Originally published at the Government Affairs Institute at Georgetown University House and Senate leaders will push through an omnibus spending package this week. The bill combines 11 appropriations bills for the final months of the FY2017 calendar. Democrats walked away with some big wins in the omnibus. They struck over 100 policy riders, resisted non-defense cuts proposed by President Trump, managed to block funding for President Trump’s border wall, among other items.

However, their leverage in the budget process is being badly misunderstood. Many pundits are suggesting that fractured Republican politics are giving Democrats leverage. And while that certainly helps, it underestimates the institutional features in place that will bias budgets in favor of the minority party no matter which party is occupying it. In other words, it’s not just fractured Republican politics. It’s also existing law. So let’s look at the omnibus and how it shapes up, examine why Democrats were successful, and explain the state of play for FY2018.

The omnibus spending bill is the culmination of the 2015 Bipartisan Budget Act (BBA), negotiated by then-Speaker Boehner, Majority Leader McConnell, and then-President Barack Obama. In other words, the $1.07t funding level was negotiated more than 2 years ago. Democratic finger prints are all over this budget. To some degree the omnibus is not necessarily an example of Republican weakness. Rather, it’s an example of the fact that this deal was written 2 years ago when Democrats controlled the White House. The only reason we’re still talking about it is because after the November election, Republicans decided to put in a stopgap continuing resolution (CR) to allow President Trump to put his imprint on the budget.

That was a dramatic mistake for a couple of reasons. First, defense and nondefense numbers were already written in law by the 2015 BBA. So whatever imprint President Trump and the 115th Congress wanted to make on FY2017, they had to do it within the existing framework negotiated by the 114th Republican majorities and President Obama. If Republicans wrote a bill that broke those caps, it would trigger another round of automatic cuts. Any appropriations changes would at best play around at the margins because defense and nondefense numbers for this fiscal year are already set in law. You would need to write a new law to change them, a lift that would have required an enormous amount of political capital which simply doesn’t exist when Congress is also trying to rewrite the most substantial healthcare policy in a generation.

This limited the majority’s ability to reshape funding for new things. If they wanted to cut agencies’ funding to make room for other priorities, they’d have to do it through the 2015 BBA defense and nondefense partition. In other words, to make room for a border wall, they would have had to find it in the nondefense section of the budget. But making room for priorities even within the nondefense segment of the budget is very difficult.

This brings us the second problem Republicans faced for FY2017: all appropriations bills still go through a filibuster in the Senate. If they wanted to cut EPA, NIH, State, and other agency budgets to make room for a border wall, Republicans would certainly face a Democratic filibuster. This assumes that all Republicans would support deep cuts to other nondefense agencies, an assumption that ignores the strong bipartisan support for many agencies on the nondefense side. Simply gutting some agencies to make room for other priorities ignores the realities of appropriations politics in both parties.

All of this stems from the heart of the problem. Republicans cannot reorient government by working under old budget numbers. They need a new budget. This would normally make FY2018 a critical opportunity for Republicans to remake government in their vision. In a normal budget year, Republicans would write a new budget, boost defense spending and cut nondefense through the budget process, and then write their appropriations bills to those numbers.

The problem with this is this is not a normal budget year. The sequestration caps put in place by the 2011 Budget Control Act go back into effect next year, capping defense spending at $549b and nondefense spending at $515b. Put differently, defense and nondefense spending will get an across the board cut by $2b and $4b, respectively, if Congress doesn’t ease the BCA caps (for the third time). Republicans will have to amend sequester if they want to fundamentally restructure government spending.

The irony here is if sequester had not been allowed to take effect in 2013, Republicans would be in a very strong position to fundamentally reorder government spending. They could simply pass a new budget by majority vote and rewrite defense and nondefense budgets without Democratic input. Instead, Republicans handcuffed future Congresses by triggering sequestration. The budget process cannot amend the BCA. So Republicans will again have to change the law, which will require 60 votes in the Senate, which means Republicans will again be negotiating with Democrats in FY2018. And all of this is because they allowed sequestration to take effect in 2013.

Sequestration, a policy Democrats loathed when it went into effect, is ironically their greatest ally. It forces the new Republican majorities to rewrite the law before they can pass spending bills. That requires the support of at least eight Democrats in the Senate. Democrats’ leverage will continue to give them outsized influence in the budget and appropriations process in FY2018. As long as sequester is in place, it gives the minority party leverage in budget and appropriations.

If history is any indicator, this will push back negotiations all the way up to the October deadline where Congress will either address BCA caps and sequester head on or, more likely, negotiate another two-year deal. This week Congress will pass the easy bill. It gets much harder later this month when the FY2018 budget cycle starts.

Joshua C. Huder, Ph.D., is a senior fellow at the Government Affairs Institute.

New Budget Drama and Procedural Inventiveness. Got to love the House.

The optimism following the 2-year budget deal struck last October is officially over. Many House majority members who were unhappy with the deal remain unhappy. Over the past month House conservatives have signaled they will not vote for a budget unless they find $30 billion in cuts. Passing a budget (or appropriations) below the discretionary numbers in the 2-year deal appears to be a nonstarter. So conservatives are attempting to find the savings in mandatory programs. They are circulating an interesting plan to reform major entitlement programs on appropriations bills through the reconciliation process. Here are the major take-aways from that last sentence: conservatives want to circumvent the House Ways & Means Committee, authorize changes to mandatory spending through the discretionary spending process, and do so using a straight majority process rarely used for appropriations.

This is a huge deal. It’s also a lot to unpack. It combines several processes into a plan akin to procedural acrobatics. It’s not impossible, though it would be unprecedented.

The first criticism of the plan is it violates House rules. Those rules state that members cannot add authorizing language (i.e. insert language changing Medicare benefits, taxes, etc.) in appropriations bills. Is this true? Yes. Does it matter? No. The reality is for the last couple decades this rule is waived (read: is not binding) any time an appropriations bill is brought to the floor. So would this rule violation really prevent the House from passing this mega-bill? If they have the votes, no.

The second criticism is that you can’t use reconciliation to pass appropriations bills. Actually, you can, though it has only happened twice. The last time reconciliation was used on appropriations was in 1981 for rescissions in previous spending bills (basically taking away previously awarded budget authority). It has never been used to circumvent a committee of jurisdiction or provide budget authority for executive agencies. In this respect, this is a huge unprecedented step for both reconciliation and the appropriations committees.

The plan has the advantage of attaching mandatory spending cuts to must pass spending legislation. This is something the President could not avoid if it made its way through Congress. There is a catch though: they can’t touch Social Security. That is expressly forbidden in the 1974 Budget and Impoundment Control Act and would subject the bill to a 60-vote point of order in the Senate, something conservatives are using this process to avoid.

Keep in mind this plan is extremely hypothetical. If they somehow navigate the minefield of very powerful people in the House (like Ways & Means Chair Kevin Brady (R-TX)), its chances in the Senate are very small at best.

Regardless, the plan gets big time kudos on style points. What it lacks in regular order it more than makes up for in procedural jujitsu-y-ness.

What does DHS/immigration tell us about the power of Congress and the President?

Institutional power is more of an academic topic. Nonetheless, it has enormous ramifications. The current immigration debate is a great example of that. Despite the rhetoric around the DHS debate, America has never had a dictator president - the current president included. However, the fight for power in the separation of powers (i.e. How big should the presidency be?) is real. The DHS/immigration debate is an interesting look into that struggle.

Much of the modern presidency’s power stems from the type of actions we are observing in the immigration debate. Reinterpreting existing law, exercising discretion on the many responsibilities under the purview of the executive branch, or writing orders and directives, presidents have ample opportunity and authority to reshape national policy unilaterally. These actions pale in comparison to actually creating law, as Congress does, but they are important nonetheless. And while Obama’s immigration action falls within precedents set by former presidents, Congress is well within its constitutional rights to correct presidential overreach.

However, Congress rarely curtails presidential unilateral actions. There have been several attempts but few are successful. The best attempt was the 1974 Budget Control and Impoundment Act, establishing the modern budget process. After Nixon impounded congressionally appropriated funds, Congress established processes and deadlines to take back budgetary control. It also established a reconciliation process that could circumvent filibusters to restore budget harmony. That process could be used to respond to executive actions if those actions fail to follow congressional intent.

As we see today even Congress's most powerful tool cannot address executive action. It would take some creative legislative drafting in order to use reconciliation to reverse Obama’s immigration action, which prohibits provisions that have no budgetary effect. Which means today’s congressional stalemate boils down to one of two possibilities. Either it can’t be done or Republicans plan on using reconciliation -which only allows a limited amount of bills per year - for another purpose.

This is the problem Republicans currently face. They cannot circumvent the supermajority requirements of the process. Even if they could, there is no guarantee Republicans could find a Senate majority once the symbolic nature of the cloture vote was removed from the scenario. Should three moderate or border Republicans join Senator Dean Heller in blocking the bill, Congress’s response would still be deadlocked.

Historically Congress’s power has been hampered by its own processes and the political realities of forging majority coalitions. It’s often very difficult pass bills through both chambers. It’s particularly challenging to find majorities to challenge unilateral executive actions that fall within the previously accepted scope of executive authority. It’s nearly impossible to find a supermajority to do that. Without a Watergate-like scandal, where illegal actions clearly occurred, Congress rarely has the ability to tame America’s 80-year tradition of expansive executives.

The ambiguity of Article II means that presidential power open to interpretation, which is another way of saying that presidents' unilateral power is mostly anything that Congress has not expressly prohibited. Given the inherent difficulties of lawmaking and the supermajority processes that have always existed in Congress, historically those prohibitions have been scarce.

As Jon Bernstein points out, every modern president overreaches at some point. With a hamstrung legislative branch, that’s likely to continue.

Budget Process Improvement Act of 2011

A new bipartisan budget reform proposal is out. My representative sent this most recent bill to my email labelled as a plan to fix the budget process. Representatives Daniel Webster (R-FL), Jim Rennaci (R-OH), John Carney (D-DE), Larry Buschon (R-IN), Jim Himes (D-CT), Bill Owens (D-NY), and Kurt Schrader (D-OR) came up with this proposal some time over the past week or so. I've listed the condensced version of their bill below with some commentary. Overall, the reform wants to add more foresight in the budget process. Whether that will effectively be done with these measures is another story. Most of these measures would simply make the estimates much larger and uncertain. However, there could be some benefit from trying to get a more long-term vision of the nation's budget. Requires thorough analysis of the 20-year impact on our deficit when determining the cost of proposed legislation.

I’m not sure this would significantly help the budget process, at least not strictly speaking. Concurrent resolutions are already required to issue deficit estimates for a 5-year period and often include a 10-year estimate. The problem is these estimates aren’t very accurate. There is so much uncertainty even year to year that trying to accurately estimate budget deficits is really difficult. Extending this window another decade makes the statistician’s job that much harder. Trying to predict what will happen in 5 years is hard enough. Trying to predict it in 20 is (definitely) impossible. Short of Miss Cleo's tarot cards, nobody can predict the future in that kind of uncertainty. This is obviously politically motivated. Today, a 20 year deficit estimate would be somewhere around 30+ trillion dollars. That could give leverage to politicians trying to push tax hikes or spending cuts.

Requires the Office of Management and Budget (OMB) to issue an annual report examining the true extent of our debt burden (such as the costs of Fannie and Freddie, which are currently excluded from the annual budget).

This is not my forte so I won’t say much about this. But, if I’m reading it correctly, this would mean that all federal mortgage-backed loans would be added to the national debt report. It would be an understatement to say this would significantly “add” to our national “debt.”

Requires the Congressional Budget Office to issue a report projecting revenues over the next decade.

Similar to the suggestion above, this again extends CBO estimates. Currently, the CBO is required to project revenues for at least the next five years. This would simply extend that requirement to a 10-year window, which is often done already. As with the first measure, this would give a long term estimate at the cost of accuracy and certainty. In sum: bigger numbers with much less certainty about whether they are accurate estimates or not.

Requires performance reviews of each tax exemption, deduction, or credit at least once every four years to establish effective oversight of these tax expenditures.

In my opinion this is a very helpful suggestion. If nothing else, it starts a much needed conversation in American politics. Exemptions, deductions, and credits are often the hidden link between private business and the government. In many ways, it's like anti-spending. By giving subsidies to specific industries, businesses, or corporations the government incentivizes how policies and programs operate and are financed. These types of regulations and subsidies account for more than one-third of social welfare expenditures in America as opposed to one-tenth in other industrialized nations (see Hacker's Divided Welfare State. Required reading for those wanting to understand retirement and health benefits in America). Put simply, there isn’t enough discussion about this side of politics.

Makes Congress accountable for producing a two-year budget for federal agencies.

Again, depending on the agency this is already done to some extent. Authorizations are annual, multiyear, or permanent. Requiring a 2-year plan falls in line with this plan’s general goal: give more insight into the budgetary future. An argument could be made that this would help stem spending. If law makers see their 2 year commitment every year, they may be less likely to issue authorize or appropriate what is recommended. Whether that actually comes to fruition, however, is debatable.

Shutdown Roundtable: Lessons from 1994?

Here at Rule22, we decided to try something new: we're each going to weigh in on the looming government shutdown.  Josh's excellent post, if you haven't read it, suggests that the Democratic strategy of co-opting the Republican agenda, which has been so frustrating to some left-wing Democrats, may actually help their image in the event of a shutdown.  While Jordan and Will will jump in with their ideas later, mine considers the comparison between the current standoff and the 1995 shutdown. It's awfully tempting to reach back to 1995 and try to draw some lessons for the current situation from there.  And, on the face of things, it seems like a reasonable decision to make, but there are a few reasons that I'm not comfortable doing so.

To be sure, there are some distinct commonalities.  There's a first term Democratic president and group of upstart conservative Republicans who have a ridden in to Congress with a pretty big majority.  The Gingrich led Republicans stuck to their guns after campaigning on the Contract with America, and cheered by pundits like Rush Limbaugh, refused to submit a budget that Clinton would sign, and a government shutdown.  During the shutdown, approval ratings for both Clinton and Congress were quite low.  However, in the days and weeks after the shutdown, the American public pretty clearly attributed blame to the Republicans in general, and Gingrich in particular, while Clinton's numbers recovered quite nicely.

And here we are today, with a first term Democratic president and a big group of young, aggressive Republicans who, cheered on by Rush Limbaugh, are hurtling towards one another in a similar game of chicken.  But there are three reasons that I don't feel that the outcome will be the same.

First, the manner of leadership among Republicans in 1994 is quite different from the current Republican leadership.  As Jordan established before, John Boehner has adopted a very diffuse approach to leadership.  While Newt Gingrich was quite radical in his centralization of speaker power, Boehner has been equally radical in his decentralization of power.  I've argued that the difference in leadership style is due, at least in part, to the ideological heterogeneity in the current Republican caucus, but there's no denying that Boehner is less likely to give The Treatment to his rank-and-file than his predecessors were.  The fact that the Republican leadership has allowed for a more decentralized approach essentially gives them a chance to diffuse the blame a bit.  It will be harder for the Democrats to bring this to Boehner's lap the same way that they did to Gingrich.

Second, though somewhat related, Boehner has kept a much lower profile than Gingrich did.  Further, Pollster's Mark Blumenthal shows that opinion on Boehner has been far less negative than it was for Gingrich leading in to the government shutdown.  Whereas Gingrich did his best to stay in the headlines, Boehner seems content to take a step back. Blumenthal also shows that public opinion waited to swing against the Republicans until Gingrich threw his hissy fit about having to get off the rear exit of Air Force One.  I don't see Boehner making a similar misstep.

Third, I'm doubtful that Obama will be able to skirt the blame as successfully as Clinton did.  Obviously, it hurts Obama that Boehner is a tougher target than Gingrich was.  Beyond that though, Clinton's ability to point his fingers at the Republicans was pretty masterful (they didn't call him Slick Willy for nothing).  While Obama's been occasionally able to clear some hurdles brilliantly, he's flubbed at times as well.  In particular, the Democratic PR team will have to do a better job of message discipline than they have been recently if they're going to win the spin game.

We'll see if I'm right in the coming days and weeks, but I just don't see a government shutdown hurting the Republicans quite as much this time around.  It'll be interesting to see.  In the meantime, I've almost managed to get my students interested in the budgetary process.  If the implications of a government shutdown weren't quite so close to home, and quite so severe, I might be able to enjoy the pedagogical opportunity a bit more.

Shutdown Roundtable: Bargaining Strategies

One thing is certain: Republicans’ bargaining strategy is a winner. Over the past couple years Republicans won major legislative concessions while still winning the message battle. It’s an impressive feat for a minority party (or sort of minority party in today’s Congress). Democrats on the other hand take a different approach. They are willing to compromise. Nowhere was this more evident than the healthcare debate. Republicans demanded legislative concessions. Democrats would cave, adding those elements to the bill. Then, Republicans would reject the new bill and demand more concessions. Demand and dump is one of the ways Republicans have remained both relevant in policy negotiations while consistently winning the message battle. Though Republicans ultimately lost on healthcare – there is only so much a minority can do – they managed to pull off some notable victories. They enticed Democrats to draft a conservative bill while remaining in opposition to the bill itself (example: Budget Chairman Ryan's proposed mechanism for exchange rates is virtually the same as the ACA’s. See here and here). These tactics are not only brilliant, but if you’re a Democrat, they’re fairly embarrassing.

This game is continuing in today as members negotiate the budget. As we draw closer to a government shutdown, Democrats are still whiffing on fundamental bargaining strategies. As it stands today, Republicans are trying to squeeze another $7 billion in spending cuts on top of the $33 billion they already negotiated. Why can they do this? It’s part Democrats trying to be “bipartisan” and its part Republicans torn between the two wings of their party.

For one, Democrats seem willing to accommodate Republican policy positions from the start. This tactic may seem a gesture of good faith but it effectively undercuts Republicans. If Democrats preempt Republican policy preferences, Republicans can’t claim victory. They cannot go to the public and say they negotiated a deal or fought hard for their principles. They can’t do this because Democrats are doing it for them. Republicans could, of course, reposition themselves. Instead of fighting it, they could wax poetic about their dominant economic philosophy. But you don't win elections that way. Their current strategy is so much more effective – not to mention damaging to Democrats.

Over the past couple of years, the demand and dump strategy has worked with great effect. However, a government shutdown is different. It’s a larger stage with bigger consequences if negotiations fall through. Government workers will not get paid. The justice system will shutdown. The 1995 shutdown derailed the Contract with America and ultimately Gingrich’s domination. If the blame falls on Republicans, it will be the first time in a long time this strategy hasn’t worked. The rewards are big but so are the risks. In a couple days we’ll see if it works once more.