Thursday, October 5, 2017

TAXES | Using the Budget to Reform

Mike Enzi (R-Wyoming), Chairman
Senate Budget Committee
The following is from Dana Chasin's Update 211, reposted by permission (see last sentence):

Washington, D.C., October 5, 2017 – Today saw two major steps toward Congressional approval of a FY 18 budget resolution. The House passed its 2018 budget resolution providing reconciliation instructions, paving the way for tax reform, on a 219-206 vote, 18 GOP members voting against. And Senate Budget reported out its budget resolution along partisan lines.  

The Senate language allows for a $1.5 trillion deficit increase. The House measure calls for deficit reduction. Reconciliation instructions included in both the House and the Senate resolutions would allow Republican leadership to craft a tax package that adjusts revenues and spending that could be passed with a simple majority in the Senate.  To pass the cuts, Senate Republicans would have to vote in near unison.

The budget resolution's chances of passage and what's at stake are considered below. 

In day one of the two-day Senate Budget Committee markup, Senators drilled down tax policy. Republicans attempted to legitimize the Big Six’s policy framework, claiming it was based off bipartisan principles, but Democrats excoriated the proposal for rewarding the wealthy, dramatically increasing the deficit, and increasing taxes for the middle class.  

Stakes: Reconciliation

Senator Bob Corker (R-TN),
Maverick on Senate Budget Committee
Per the House resolution, top lines instructions for 11 House committees require a $213 billion decrease in spending. House Judiciary ($45 billion), Oversight and Government Reform ($32 billion), and Ways and Means ($52 billion) Committees are charged with producing the largest cuts in spending from 2018 to 2027.

Reconciliation instructions now require specific  changes from the Senate. Given debate during the markup session regarding the $470 billion of cuts expected to Medicare, much anxiety revolves around the reconciliation recommendations that will arise from Senate Finance. Sens. Sanders, Harris, and Stabenow led the Committee with the most amendments opposing these cuts. 

FY 18 Spending Top Lines

Today’s Senate budget resolution sets a topline FY18 discretionary spending at $549 billion for defense and at $516 billion for nondefense discretionary. By contrast, the House resolution calls for $621.5 billion for defense and $511 billion for non-defense discretionary spending in FY18  President Trump’s FY18 budget proposed $616 billion in defense, $538 billion non-defense.

The Senate figures represent a decline from the FY17 budget toplines of $616 for defense and $551 for non-defense discretionary spending. The administration and the House are more consistent with last year’s numbers, although the House resolution calls for a slight increase in defense spending matched by a slight decrease in nondefense discretionary spending.

The Senate resolution also calls for $632 billion in nondefense spending cuts between 2018 and 2027. Budget Committee Democrats repeatedly raised concerned that these spending cuts would translate into deep slashes vital social programs. Particularly contentious were proposed cuts to Medicare and Medicaid, Pell grants and Head Start programs, and WIC programming.

Points of Agreement

Today’s markup was anything but bipartisan. Democrats repeatedly introduced amendments to protect social programs, push Republicans towards budget neutrality in tax legislation, and ensure that the CBO analysis of tax proposals. Time and time again, these amendments were either tabled or failed outright – almost always along 12/11 partisan lines... yet another indication that Republicans plan on using a majoritarian route in pursuit of their tax reform agenda.

Sticking Points Going Forward

Yesterday, Sen. Corker indicated an unwillingness to play ball with his fellow Republicans, stating that he would not vote for a tax bill that was not permanent and that added to the deficit. While it is not clear how much he will end up pushing back, his dissent is worth noting – Republicans can only lose two votes on the Senate floor if they want to move their tax plan with reconciliation.

Beyond this, the Senate is unlikely to accept the $203 billion in mandatory cuts to social programs as the House sets out. These differences will have to be addressed in conference for agreement to be reached on a joint budget resolution.

Next Steps and Deadlines

Since the budget resolutions passed on the House floor and through the Senate Budget Committee today, attention turns now to how it will fare on the Senate floor. 

The Senate will address the budget after its return from Columbus Day/Indigenous People's Day recess on October 16. Thereafter, the two houses will conference to hash out differences.  Both the House and Senate Budget Committees are to have their recommendations for tax reform submitted by November 13. The reconciliation process and budget for FY 18 must be completed by December 8 in order to avoid a government shutdown.

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