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September 20, 2023

What to expect in Washington (September 20)

House Republican leaders postponed a Tuesday procedural vote on a proposed border security-focused continuing resolution (CR) that would extend government funding through October 31 and impose an 8% cut to all federal agencies except Defense and Veterans Affairs and reopened discussions on the bill to try to win the votes of conservative members, some of whom demanded additional spending cuts. There are 10 days remaining before a shutdown unless both chambers pass the same version of a CR to extend funding beyond September 30, and the House currently doesn't have the votes to pass its version.

Republican Study Committee Chairman Kevin Hern (R-OK) tweeted yesterday, "What's clear to me is that there is a strong desire among members to revise the spending levels for this CR in order to get on a path to 218 Republican votes." He plans to offer an amendment to cut spending to $1.471 trillion, the FY2022 level. The Washington Examiner: "As it becomes much clearer that the 31-day continuing resolution negotiated by members of the House Freedom Caucus and the Republican Main Street Caucus doesn't have the votes necessary to pass, House Republicans have been huddling all day Tuesday trying to find a way to pass a stopgap funding measure. The current proposal cuts spending to the $1.59 trillion level set in the bipartisan debt ceiling deal signed into law by President Joe Biden in June. But, in a closed-door meeting in Whip Tom Emmer's (R-MN) office, Hern, the chairman of the [RSC], the largest ideological caucus in the House GOP, presented his plan, which would cut funding down to $1.471 trillion. That's the number that hardline conservatives have called for and appropriators have already marked up the bills for this year."

The Wall Street Journal reported, "Republicans from across the political spectrum huddled in the offices of House Majority Whip [Emmer] on Tuesday and tossed around ideas like cutting fiscal 2024 spending to the levels of pre-pandemic budgets; creating a commission with the power to reduce the country's $33 trillion debt; and removing money earmarked in annual appropriations bills after Russia annexed Ukraine's Crimean Peninsula in 2014." The report noted that Republicans in swing states — 18 House Republicans hail from districts Biden won in 2020 — are losing patience with the demands of their more conservative colleagues.

The Washington Post reported, "Some Republicans are seriously considering getting behind a shell bill that could, as soon as next week, serve as the vehicle that allows moderates to supersede McCarthy's control of the House floor and force a vote to keep the government open … What exactly gets included in such a discharge petition remains unknown, but those familiar with the planning said it would include a short-term funding plan to avert a shutdown."

In a related development, as has been an issue with appropriations bills prior to the congressional August recess and since, House Republicans were unable to attain the requisite votes on the rule for consideration of the Department of Defense spending bill. Reps. Ken Buck (R-CO), Andy Biggs (R-AZ), Ralph Norman (R-SC), Dan Bishop (R-NC) and Matt Rosendale (R-MT) voted against the rule. Punchbowl News reported: "Republican leadership and other top lawmakers surrounded Norman in a bid to get him to flip his vote. But Norman has been steadfast that he will not vote for bills until McCarthy commits to a topline spending number for FY2024. Norman wants discretionary spending set at $1.47 trillion."

Politico: "House Rules Committee Chair Tom Cole (R-Okla.) lamented that the Pentagon bill was being blocked by a faction of right-wing lawmakers who had demanded the bill be written with a variety of conservative social provisions. 'That's not good legislation. And that's blackmail,' Cole said. 'So hey, if there's … nothing in this bill you disagree with, tell me why you're voting no.'"

There is also the looming threat that conservatives try to remove House Speaker Kevin McCarthy (R-CA) from the position through a motion to vacate the chair for his handling the of the CR and broader government funding impasse. Rep. Matt Gaetz (R-FL), a late holdout on the January Speakership election and a focus of the motion to vacate speculation, said on Hannity Radio: "If we have to endure a shutdown, we may have to hold the speaker accountable for that shutdown because it was his failure to manage the calendar that has put us here."

Both the House and Senate continue to try to approve regular FY2024 appropriations bills — the House at FY2022 levels and the Senate at FY2023 levels — to strengthen their hand in negotiations for a long-term approach to government funding that would presumably follow the current and more urgent efforts to agree to a short-term patch. The Senate effort to approve a three-bill minibus of FY2024 appropriations bills has been beset by Senator Ron Johnson's (R-WI) concern that they instead be considered one by one.

Senate Majority Leader Chuck Schumer (D-NY) made clear that the House Republican CR wouldn't be welcomed in the upper chamber, tweeting: "We are days away from another MAGA government shutdown. Avoiding one will require the House GOP to quickly accept a bipartisan solution Instead they released an extremist CR bill that would cause immense harm to the American people. It is a non-starter in the Senate." That leaves the question of where negotiations go if the House can pass a bill, though the thinking is it could initiate negotiations with the Senate.

In an interview on MSNBC's Morning Joe September 19, Treasury Secretary Janet Yellen said, "Well, look, there's absolutely no reason why we should have a government shutdown. Democrats in both the House and the Senate and Republicans in the Senate are ready to pass appropriations bills or a continuing resolution to keep the government open and operating for the American people. Speaker McCarthy needs to find a way to do his job, which is to pass a continuing resolution or bills. So, there's no reason. We've got a good, strong economy. It has a lot of momentum. Inflation is coming down. The labor market remains very strong. We really don't need a shock to the economy in the form of a slowdown. There's no reason for it at all."

Budget — House Budget Committee Chairman Jodey Arrington (R-TX) September 19 released an FY2024 "budget resolution [that] balances the federal budget in 10 years and reduces deficits by $16.3 trillion over that same timeframe, resulting in a $130 billion surplus by FY2033 … [and] focuses on restoring America's fiscal health by right sizing the bloated bureaucracy, reversing Biden's spending." A summary said the resolution allows for Ways & Means-authored legislation that "extends pro-growth tax reforms and improves the tax code," and for "legislation related to promoting American medical innovation if such a measure would not increase the deficit for the period of fiscal years 2024 through 2033."

Budget resolutions are nonbinding and offer no procedural advantages unless reconciliation instructions are included, which is not applicable in this case. It is possible that releasing a fiscal roadmap at this point may be useful in demonstrating to conservatives the intention to reduce spending. Politico Morning Tax noted that the resolution, which is being considered in Committee today, "is largely silent on other big questions on taxes — like how Republicans might pay for TCJA extensions, or how much they'd want to offset at all."

Tax — Tax Notes reported this morning, "House Republican taxwriters are hoping other countries will delay implementation of pillar 2 of the OECD global tax deal while they separately encourage leaders to implement versions of the United States' global intangible low-taxed income regime." Weeks after the GOP members' trip to Europe, the report cited Rep. Ron Estes (R-KS) as saying they are also focusing on what work can be done outside the OECD, including encouraging countries to follow the US lead in implementing something similar to GILTI. "There doesn't have to be any additional work on the part of OECD for countries to implement their own version of GILTI, and I would encourage them to do that," Estes said.


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