Legislative Activity

This past week has seen the evolution of the federal government shutdown and the slow emergence of a potential framework for a deal. Late in the week, President Barack Obama met separately with Senate Democrats, Senate Republicans, House Democrats and House Republicans. While President Obama continues to maintain he will not negotiate on the shutdown or the debt limit, this week’s conversations did in fact advance the exchange of ideas needed to reach a compromise and negotiations are now ongoing between the White House and various elements in both the House and Senate.

House Budget Committee Chairman Paul Ryan (R-WI) authored a Wall Street Journal editorial that appeared in the Wednesday, October 9 edition, offering ideas for entitlement reform, tax reforms, and spending reductions that could solve both the government shutdown and debt ceiling situations. In the Senate, Sen. Susan Collins (R-ME) has taken the lead on developing a comprehensive package that could pass in that chamber. Her proposal includes: (1) a six-month extension of funding for the federal government; (2) a short-term extension of the debt ceiling; (3) a repeal of the medical device tax from the Affordable Care Act; and (4) flexibility for federal agencies to deal with the financial impact of the budget sequester. The medical device tax repeal enjoys wide bipartisan support in both chambers and was part of a House-passed spending proposal passed before the government shutdown.

On Friday, it appeared that House Speaker John Boehner (R-OH) would continue to take the lead in crafting a compromise package for the House to consider in the coming days and that Senate Republicans would yield to the political need for the House to act first on both the government shutdown and the extension of the debt ceiling. But on Saturday, President Obama rejected the House’s proposals and seemed to shift negotiating power to Senate Republicans who seem more interested in cutting a deal. As a result, Senate Majority Leader Harry Reid (D-NV) and Senate Minority Leader Mitch McConnell (R-KY) have held a series of discussions over the weekend trying to reach an agreement. Senate Democrats are now calling for an increase in FY 2014 spending as a condition of the deal, a scaling back of the sequester that could be difficult to pass in the House. Conversely, Senate Republicans have stuck largely to the framework of the outline developed by Sen. Collins.

This weekend has also seen a public split between House and Senate Republicans. House Republicans fear their Senate counterparts will cut a deal with Majority Leader Reid, passing a deal in the Senate that would be forced onto an unwilling House majority as the debt deadline looms. That difference in opinion between Republicans in Congress may give President Obama and Majority Leader Reid additional leverage in crafting a final deal later this week but it also raises the risk that House Republicans will reject any Senate deal that does not include a meaningful concession on future spending.

Senate Votes Down Debt Ceiling Bill

On Saturday, the Senate voted 53-45 to block consideration of the Default Prevention Act of 2013 (S.1569), which would have raised the debt ceiling through 2014 with no other policy riders such as delays in implementation of the Affordable Care Act or FY 2014 spending cuts.

House Creates Working Group for Future Budget Negotiations

Earlier in the week, the House passed the Deficit Reduction and Economic Growth Working Group Act (H.R. 3273), which would create a select committee to negotiate with the White House and Senate on the parameters of a broad-based agreement on tax reform, appropriations, the debt ceiling, and entitlement reforms. Passage of this bill allowed House Republicans to continue presenting evidence of their willingness to discuss any number of options for improving the country’s long-term fiscal outlook. Republicans struggled to explain how this working group concept would differ from failed past efforts like the Super Committee born out of prior debt ceiling negotiations in President Obama’s first term. This bill is not expected to be taken up in the Senate.

House Continues Action on Small-Scale Appropriations Bills

Throughout the week, the House continued its post-shutdown pattern of passing small-scale appropriations bills funding select portions of the federal government, usually agencies and programs that have garnered media attention due to the negative impacts of the shutdown. These actions include:

Questions to Be Answered on the Road to a Deal

There are three big questions that must be answered this coming week on the road to a compromise passing Congress in time for the October 17 deadline to raise the debt ceiling.

Timing:  How long would a Continuing Resolution last?  Some proposals have been as short as four to six weeks and some have offered a time period as long as the remainder of FY 2014. Similarly, how much would the debt ceiling grow and how long would that renewed authority last? Proposals have ranged from a short-term extension into November (to allow for more negotiations on long-term entitlement and tax reforms), to after the 2014 elections.

Together or Apart:  Should the debt ceiling and FY 2014 funding package be considered together or separately? There remain some conservatives in the House who support the idea of a short-term debt ceiling extension while the government funding question remains unresolved. The more likely solution is for a package that solves both challenges together.

Concessions: Which concessions are most likely? To pass the House, Republicans must have something to show for their actions of the last few weeks but President Obama and Senate Majority Leader Reid are pressing their political advantages and remain committed to opposing any concessions. Indeed, Sen. Reid is now calling for increased spending rolling back the sequester cuts scheduled for January, a change that would further the public perception that the debt and spending showdown has been a rout of congressional Republicans. The medical device tax now appears to be the most likely concession that will be included in a compromise package but we expect a number of other ideas to be negotiated before a final deal is reached. The other items offered by Sen. Collins this week all have some chance of being in a final deal.