While the flurry of activity in Washington has been primarily confined to the Executive Branch and the President’s executive orders, cabinet nominees, and the DOGE, Congress continues to spin its wheels on a path forward with reconciliation, with both House and Senate Republicans making their respective cases to the President directly today and over the weekend. Meanwhile, the March 14 government funding deadline is fast approaching and the federal borrowing “X date” is looming over Q2 or Q3. Below is an update on the legislative process and how the next few months may play out.
Reconciliation. The case for one bill is gaining some incremental momentum with House Republicans this week, partly prompted by Senator Graham’s insistence upon moving forward with a slimmed-down Senate package (border/energy/defense). The House is attempting to coalesce around a one-size-fits-all approach that is scored via a current policy baseline, though holdouts to that approach remain. The fight around the baseline is best understood as a policy disagreement over whether-and to what extent-tax cuts (both current and new) should be offset with spending cuts and/or new revenue.
To that point, the Energy and Commerce has the most work to do in order to push spending cuts deeper, beyond the $200 billion they initially contemplated. But the deficit hawks-albeit a rather small group-remain dug in. This morning, Leadership and various Members, including deficit holdout leader Chip Roy, were invited to the White House to meet with the President. House Leadership is hoping that the President can begin to put his thumb on the scale in favor of their approach and begin to whittle away at the list of deficit holdouts.
From a House Leadership perspective, deficit hawks will be hard-pressed to vote against border spending. Thus, should the Senate two-bill construct win out, the House Republican deficit holdouts will have less incentive to vote for a tax bill later in the year that is not fully offset. Making the offsets even more difficult, Treasury is pushing for a permanent tax bill, or at least a 10-year bill. Unless those differences are resolved, the concern remains that the deficit hawks are likely to vote no on an eventual tax bill and it will begin bumping up against the December 31 deadline, potentially necessitating a bipartisan negotiation. Given all that is going on with DOGE, and their opposition to TCJA in 2017, Democrats will have a hefty price for their admission into the policymaking process.
Government Funding. At this point, a continuing resolution (CR) prior to March 14 appears to be the most likely outcome. Democrats are in no mood to negotiate over government funding given the efforts of DOGE. A CR is almost always opposed by defense hawks, but if reconciliation gets going in earnest, the slug of mandatory defense money included therein will likely help to alleviate their concerns. The length of a CR is an open-ended question, however. While an extension through the end of the fiscal year is most likely, it’s possible that it stretches to the end of the calendar year if reconciliation gains momentum.
Debt Limit. President Trump continues to push for inclusion of a debt limit increase in reconciliation and remains upset about it not being taken care of at the end of last year prior to him taking office. But given that reconciliation rules require Congress to increase borrowing authority to a specific number (rather than suspend application of the limit for a time certain), it’s all but impossible for Leadership to include a hike and maintain simple majority partisan votes in each chamber. The outlook is thus unclear at the moment and the issue appears to be on Congress’s backburner for now while remaining a priority for the President and Treasury.
Congressional Review Act. The House is planning to release a final list of CRA bills, potentially as early as next week, but no later than the week of the recess. Each CRA is expected to go through the committee process, with floor votes expected to start in March. The process will be highly coordinated with the Senate and the White House.
Disaster Money. Leadership acknowledges that money is quickly needed but given that all of their energy is currently being spent on reconciliation, they have not yet turned to a disaster funding bill in earnest. That said, it does remain a potential point of negotiating leverage with Democrats and thus could factor into any number of upcoming negotiations (i.e., government funding, debt limit).
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