McDonald Hopkins Government Strategies Advisory: This Week in Washington -- March 27, 2015

House passes budget

On Wednesday, the House passed a budget by a vote of 228 to 199. The House budget that passed increased defense spending, a move that was necessary to secure the votes of Republican hawks.

The House's budget makes cuts to domestic spending on everything from food stamps to welfare. The blueprint also repeals the Affordable Care Act and makes changes to the tax code.

Republicans in the House chose to pass a budget that increased military spending even though that spending would not be offset, a major concession for some fiscal conservatives.

Those in the leadership team believe a budget resolution will mark a shift for a Republican conference that has slid from one political crisis to another over the last three months. With a budget passed, Republicans believe they could finally be getting on the same page.

After months of tough votes for GOP leadership, passing a budget makes good on a promise the party made to voters on the campaign trail.

Whether House leaders can translate their success to future legislative showdowns, however, is still very much up in the air.

For some, the reason they were willing to go along with Boehner on Wednesday was a simple shift in the speaker's leadership style. Instead of simply forcing his conference to unite behind one idea, Boehner gave his members several options. Nicknamed the "queen of the hill" approach, several budgets—including one passed out of the budget committee called Price One, another with additional military spending called Price Two and a third put forward by the Republican Study Committee—each got their vote on the floor. Because Price Two got the majority of votes, it was the one to move forward. Members say the move allowed everyone to be on record supporting something he or she likes.

The other reason Republicans were more willing to cooperate than they have been in the past is that there is an overwhelming sense that defense spending is still a holy grail for the party. Even as the party's libertarian wing beats its drum, defense spending is still an overwhelming priority for much of the caucus.

Excess spending on domestic programs remains something conservatives are steadfastly opposed to, but upping the ante on national defense at a time when the U.S. faces new threats from terrorism abroad seems easier for many Republicans to swallow.

But whether the strategy can be copied and used again to placate all sides of the GOP's conference on more contentious issues in the future, like tax reform or a debt ceiling vote, is still uncertain.

The 17 Republicans who voted against the budget were Reps. Justin Amash (Mich.), Ken Buck (Colo.), Barbara Comstock (Va.), Rick Crawford (Ark.), Chris Gibson (N.Y.), Tim Huelskamp (Kan.). David Jolly (Fla.), Walter Jones (N.C.), John Katko (N.Y.), Raúl Labrador (Idaho), Frank LoBiondo (N.J.), Thomas Massie (Ky.), David McKinley (W.Va.), Martha McSally (Ariz.), Mick Mulvaney (S.C.), David Schweikert (Ariz.), and Jim Sensenbrenner (Wis.).

Senate passes budget

It took until 4 a.m., but early Friday the Senate finally passed a budget, despite objection from two of the party's presidential candidates.

After the House passed its budget on Wednesday, the Senate narrowly agreed to its own budget after an all-day vote-a-rama that kept senators in the chamber for over 15 hours voting on more than 40 different amendments.

The entire Senate Republican conference supported the budget, with the exception of Sens. Ted Cruz and Rand Paul, both of whom are expected to make a run for president in 2016.

The 15-hour session included a slew of votes offered by members of both parties, largely intended to make opponents take politically difficult votes.

A conference committee is expected to reconcile the relatively few disagreements between the two budgets after a two-week congressional recess.

The budget document isn't law; it's a symbolic and often fuzzy outline of the party's goals for the remainder of this Congress. That Republicans had such a difficult time attracting sufficient votes from only their own members on what amounts to a messaging bill does not bode well for those priorities in the future.

Many of the concessions leaders made to their members in order to pass the budget are effectively IOUs. And over the next few months, rank-and-file members will come calling to cash in.

Both Republican budgets call for repeal of the Affordable Care Act, drastic cuts to non-defense discretionary spending and, perhaps most significantly, raise spending for defense while making massive (but as-yet undefined) cuts to entitlements.

In order to actually do any of that, though, congressional leaders and appropriators will be tasked with creating new legislation that can attract at least six Democratic votes in the Senate and earn President Obama's support. That's no small task.

As Sen. Chuck Schumer (D-NY) gleefully noted Thursday afternoon, budget-writers haven't laid out a very clear path for how to get there, leaving appropriators to fill in a lengthy list of blanks in both budget documents in order to achieve the financial cuts Republicans desire.

Members of the two chambers' budget committees have made it easier on themselves when it comes to the Affordable Care Act. Both chambers have agreed to deal with repeal through reconciliation, meaning they won't need to attract any Democratic votes to pass it. The bill is certain to earn a presidential veto and will not have the Democratic support to overcome one.

The real trouble will come with defense and entitlement spending. Congressional Republicans were able to raise the defense spending counts in their budgets in a work-around move that will not require Democratic approval – raising the limits for Overseas Contingency Operations accounts. But many members are still hopeful that they'll be able to further add to the Pentagon's budget, raising the defense caps under the Budget Control Act before another round of sequestration cuts hits in January, which will require Democratic approval.

Senator John McCain (R-AZ), one of the chamber's leading foreign policy hawks, said he and other members are hopeful that discussions over the next several months will result in a deal that will raise the caps for defense spending to a level acceptable to at least 60 members in the Senate and a majority in the House. Already, he and Sens. Kelly Ayotte and Lindsey Graham are engaging in conversations with Democrats to craft just such a bill.

The end of sequestration?

The sequestration spending caps, once thought to be so odious that Congress would never actually allow them to take effect, are set to hit again in October. And despite all of the internal fighting among Republicans over whether to bust the limits on defense spending, the budgets that the House and Senate passed this week did nothing to stop it.

The much-lauded bipartisan 2013 Ryan-Murray agreement to alter some of the caps lasts for just two years and will end in October of this year, leaving Congress with the headache of how to handle the across-the-board cuts. But given the power defense hawks have shown in both chambers over the last week of budget negotiations, there are clear signs that even the Republican-controlled Congress doesn't want to face another round of sequestration.

Senate Budget Committee Chairman Michael Enzi has left the door open to a deal to do just that. Enzi and his fellow committee members inserted a small provision into the Senate Republican budget that was released last week designed to give other committees the flexibility to do a Ryan-Murray: Part Two.

The "Deficit-Neutral Reserve Fund to Strengthen America's Priorities" looks innocuous enough. It's vaguely worded and buried in the Senate's budget alongside several other reserve funds aimed at energy, tax reform, healthcare, and other legislative issues. But the 11-line provision could set the stage for a deal to eliminate, or at least alleviate, the sequestration caps for both defense and non-defense funding set to go into effect early next year.

That last bit is key. If Republicans hope to spend additional money on defense over the next year, they'll need to pass a law through both the House and Senate that alters the Budget Control Act. Altering the defense spending caps is unlikely to be enough to earn the support of six Democrats in the Senate, much less President Obama's signature. That means that congressional negotiators will have to alter the caps for both defense and non-defense programs.

In the Senate, defense hawks appear to be open to the idea. And the fact that Enzi, unlike House counterpart Tom Price, has left the reserve fund open to defense and non-defense spending, is a sign that a deal—however difficult—is possible.

Republican Sen. Kelly Ayotte of New Hampshire, who has been a vocal supporter of raising the defense caps and opposed BCA when it passed in 2011, called the fund "an important first step" in overturning the sequester caps in a press conference with GOP leadership Tuesday – "if the Democrats want to work with us on a bipartisan resolution," she emphasized.

Ayotte is reportedly part of a working group that includes Sens. Lindsey Graham, Tim Kaine, Angus King, and Roger Wicker that has been discussing a potential solution over the last several weeks. Graham told The Hill that he would be willing to close certain tax loopholes in exchange for changes to entitlements in an ambitious agreement he termed "a mini Simpson-Bowles." So far, the group is still talking.

And although Sen. Patty Murray traded in her budget gavel for one on the Health, Education, Labor, and Pensions Committee this year, she's already pushing for another deal to end or alter sequestration. Murray pushed legislation that raises the caps by $74 billion in each of the fiscal years 2016 and 2017. The Washington state Democrat offered the bill as an amendment to the Senate.

The Murray amendment unsurprisingly failed to pass through a Republican-controlled Senate, given that the offsets come from closing as-yet-unidentified tax loopholes on businesses and the wealthy. But, the measure signaled the growing interest in raising the caps.

Watch this week's Washington Business Brief video.

House passes doc fix, what’s next?

On Thursday afternoon, the House passed a permanent repeal of the Medicare Sustainable Growth Rate (SGR) in shockingly bipartisan fashion. The deal, brokered by Speaker of the House John Boehner (R-OH) and House Minority Leader Nancy Pelosi (D-CA), passed by a margin of 392 to 37. The 37 no votes came from 33 Republicans and four Democrats.

The measure now moves to the Senate, but the Senate could only take it up on Friday by unanimous consent. Given concerns that still exist on the right and the left about the deal, unanimous consent would have been difficult for McConnell to get. As a result, McConnell announced that the bill wouldn't come to the floor in the Senate until after its Easter recess.

The Senate is scheduled to leave for a two-week recess on March 30, so the earliest it could take up the doc fix is April 13.

The current doc-fix patch expires on March 31 and, as all the news coverage notes, if Congress doesn't act, doctors would face a 20 percent payment cut from Medicare.

But it's a little more complicated than that. The Obama administration would likely buy Congress a little time. Whether it'd be enough is another question.

The Center for Medicare and Medicaid Services has in the past found ways to avoid immediate doctor payments cuts and would likely to be able to do so again.

The most obvious move is telling contractors to delay processing Medicare's physician claims for a short period of time. That's what CMS did in 2002 and 2010, when Congress wasn't able to patch the doc fix on time. Last year, as Congress was bumping up against its deadline, CMS sent out a notice to providers that it was ready to delay processing claims, although lawmakers passed a patch at the last minute.

After that, it gets more difficult. The administration could start paying doctors at the reduced rate, with the intention of making up the difference once Congress fixed it, but that would create a serious administrative burden for CMS.

The real question, though, is whether the extra time would really matter. Senate Democrats have made clear their objection to the abortion language in the House bill. They also seem intent on standing their ground for a longer CHIP reauthorization. Unless Republicans are willing to bend or Democrats ease their opposition, a couple of additional weeks might not be enough to get a deal through both chambers.

Many members are desperate to put the doc-fix headache in the past, and CMS can give them a little wiggle room to do it. But that doesn't mean that a permanent resolution is a sure thing.

New cybersecurity legislation

The House Intelligence Committee introduced legislation Tuesday designed to improve the nation's defenses against cyberattacks like the one that recently brought Sony Pictures to its knees.

The bipartisan measure intends to cajole the private sector to voluntarily share more digital information with the government by offering expanded liability protections for companies that participate, as long as they make efforts to scrub out personally identifiable data. Despite added privacy protections, however, the bill will need to overcome fears it may embolden government spying before it can become law.

The intelligence committee moved the bill, called the Protecting Cyber Networks Act, out of committee on Thursday. The Senate Intelligence Committee passed a similar measure 14 to 1 earlier this month.

The quick movement on the bill is due, in part, to a desire in Congress on both sides of the aisle to get something done soon on cybersecurity, Rep. Devin Nunes, chairman of the Intelligence Committee, told reporters during a briefing Tuesday. Leadership in both parties as well as the White House have highlighted cybersecurity legislation as a top priority, as it is viewed as one of a few policy areas where genuine bipartisan consensus is achievable.

The bill has been crafted to some degree in tandem with separate legislation being put forth by the House Homeland Security Committee, which details the parameters for information-sharing through a so-called "cyber portal" housed within the Homeland Security Department.

Before any data can be handed over to the NSA, it must go through two rounds of scrubbing out personally identifiable information—once by the business and again after the government's intake.

In addition, the House measure limits liability protection coverage to "defensive measures," meaning so-called "hack backs" would not be permitted. It also codifies the establishment of the Cyber Threat Intelligence Integration Center at DHS but would require its personnel to be borrowed from existing staff.

To combat privacy concerns, the bill being introduced Tuesday contains three separate passages that explicitly prohibit surveillance.

Transportation in Focus

DC Streetcars: A $200 Million Headache

After more than 10 years and $200 million, DC may pull the plug on its streetcar project before a single passenger ever rides on them, even though a 2.2-mile streetcar track was completed on H St.

After six months of testing the streetcars on the H St. tracks – tests that included clipping cars, cyclists sliding into the tracks, cracked rails, and a flash fire – the once much-ballyhooed streetcar project may be dead.

Earlier this month, DC Transportation Director Leif A. Dormsjo suggested that the project might not launch at all. And despite signals from DC Mayor Muriel E. Bowser that the streetcars would become operational, many are beginning to doubt it. Indeed, some are beginning to call the $200 million project the “train to nowhere.”

Whatever the fate may be of the H St. streetcar project, it is pretty clear that the dreams of building a 25- to 30-mile streetcar that would connect the H St. corridor with K St./downtown and Georgetown appear to be little more than a pipedream at this point.
 

  

 Steven C. LaTourette, President | 202.559.2600

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