Congress is leaving Washington for the summer by putting in place all the elements for another debt and spending showdown in the fall, when funding deadlines for federal agencies and highway programs are expected to collide within weeks of when the Treasury’s borrowing authority will expire.
Add to the mix the desire to extend billions of dollars in special tax breaks by the end of December and a rising call from some lawmakers for a rewrite of the international tax laws in order to fund federal programs, and the likelihood of a government shutdown looms larger by the day.
Congress set the latest piece of this potential logjam in place Thursday, when the Senate approved an extension of highway funding that lasts at least until Halloween but might have enough money to make it into mid-December. That vote followed the House’s approval of the same plan Wednesday, after the GOP majorities in the chambers fought for weeks and eventually deadlocked over competing plans for a longer-term plan.
The prospect of the collision has some lawmakers envisioning December as a mini-replay of the “fiscal cliff” of 2012, when trillions of dollars in tax cuts were set to expire on New Year’s Day and tens of billions in automatic spending cuts, known as sequestration, were slated to kick in two days later.
Despite the major pileup ahead, no serious talks have begun about the fiscal clash. The House left Wednesday for a 40-day break and will return after Labor Day; the Senate’s recess begins late next week. “When we come back after August, we’ll discuss the way forward on getting the government funded,” Senate Majority Leader Mitch McConnell (R-Ky.) told reporters Thursday.
The current debate among House and Senate Republicans is whether to try to turn the emerging legislative pileup into the source of a single huge negotiation with President Obama, or to carve it up into more manageable pieces that would prevent it from becoming a huge target of opposition, and therefore impossible to pass.
“At the end of the day you’ve got debt, ceiling, the highway-transportation fund and the sequester as triggering events, so I think we’re headed toward a deal in November or December,” Rep. Tom Cole (R-Okla.), an ally of House Speaker John A. Boehner (R-Ohio), said, arguing to tie it all into one massive bill. “I don’t know — I’d rather cast one tough vote rather than five or six.”
Sen. Roy Blunt (R-Mo.), a lieutenant in Senate Majority Leader Mitch McConnell’s leadership team, strongly disagreed. “We need to be very focused in trying to keep each of these issues on a narrow path,” Blunt said.
The apparent discord between McConnell (R-Ky.) and Boehner — who have now served together atop their respective caucuses for almost nine years — has surprised Republicans and Democrats alike. “What we really need is the leader in the House talking to the leader in the Senate,” Sen. Debbie Stabenow (D-Mich.) said.
The first hurdle comes Sept. 30, when the current funding for federal agencies will expire. The proper funding process, approving 12 separate bills, ground to a halt just as it has every year in the last decade.
The Senate’s appropriation process fell apart amid Democratic filibusters demanding a new budget deal to get out from under the automatic sequestration cuts mandated by the 2011 Budget Control Act. The House had some early success, but Boehner halted consideration of the spending bills when Democrats started offering amendments related to the Confederate flag and Confederate symbols on federal lands.
Democrats are furious that no serious negotiations have begun on finding a new, broad budget outline, which Republicans such as Cole, a senior member of the Appropriations Committee, support. Rep. Steve Israel (D-N.Y.) said, “We’d love to work with them to avoid a shutdown. They said they won’t talk to us.”
The expectation is that Congress will approve a short-term bill leaving current funding levels in place for several months, possibly into December. However, even that simple act is going to face some trouble: Dozens of House Republicans have said that they will not support any funding extension that continues to allow federal dollars to go to Planned Parenthood in the wake of controversial videos showing executives at the organization discussing abortion.
In the fight over temporarily extending highway funds, McConnell won by limiting the bill’s effective period to late October in an effort to keep it away from being engulfed in other bills.
On Thursday, the Senate first passed its version of a long-term highway bill for three years. An hour later, the chamber approved the short-term extension to buy time for negotiations with the House. Democrats think that the revenue in the short-term bill will provide funding into mid-December, pretty close to the time financial analysts expect the Treasury to hit the debt limit.
That’s the time frame when some Republicans and Democrats believe a large showdown could produce a win for everyone.
Sen. Charles E. Schumer of New York, who is widely expected to be the Democratic leader in 2017, and Rep. Paul Ryan (R-Wis.), the chairman of the House Ways and Means Committee, have advocated a large rewrite of the tax code for U.S. corporations overseas. Such a plan would include a break for multinational corporations to bring home trillions of dollars in financial assets that are currently held overseas, creating a potential windfall for the Treasury and a possible funding stream for a robust long-term deal for highway funding.
Democrats would then consider using the roughly $90 billion in revenue already identified in the three-year highway plan approved Thursday as an offset to provide spending relief for agencies squeezed under sequestration cuts. “If we were able to do the kind of international tax reform that we would like to do, we would find there would be revenues to do things that we can’t do now,” Schumer said Thursday.
Some Senate Republicans say that McConnell’s hesitance to have all the bills pile up is a reflection of his belief that Democrats are trying to undo the 2011 budget deal, which the Republican leader negotiated and takes personal pride in preserving. Still, Democrats said the only way to avoid a big pileup is to start bipartisan talks now, rather than waiting until all the deadlines run together. “Sit down and negotiate,” Schumer urged.