A Government Shutdown This December? Maybe Not.

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When, in late September, President Trump acceded to the Republican congressional leadership’s demand that he not shut the federal government before the midterm elections, the very common assumption among budget wonks and political analysts was that he would shut it when the continuing resolution expired the first week in December.

I’m not so sure.

The basics of the situation are quite simple. Only five of the annual appropriations for the current fiscal year have been enacted so far and all of the agencies and departments covered by the remaining 7 are only funded through December 7. If Congress and the president don’t enact full-year appropriations or another short-term continuing resolution by then, those agencies and departments will be forced to shut down.

The sole issue is the wall Trump wants to build between the United States and Mexico. Trump says he either gets the funds (anywhere from a $5 billion initial payment to $25 billion for what we’ve been told is the full cost) or he’ll veto the appropriation that doesn’t include it.

But that was before the election results significantly changed the political environment.

There are three things to keep in mind as December 7 approaches.

1. Does Trump Want An Actual Wall Or Just An Issue? The new reality is that, with a Democrat-controlled House next year, it may make more political sense for Trump to keep the wall issue alive through the next Congress — especially if he’ll be able to blame House Democrats for it not being funded — than to get his funding now.

“The wall” isn’t the real issue anyway; it’s just a way for Trump and other Republicans to appeal to the GOP base on immigration without using language that others will find offensive.

Given how much Trump relied on immigration in the midterms, it’s a safe bet that he’ll want to keep the issue alive and to make it a major focus of his reelection campaign over the next two years. One of the best ways to do that will be not to make a stand that it be funded now.

2. Trump Will Have Multiple Opportunities To Raise The Wall Issue Next Year. If having the issue of the wall rather than the wall itself is Trump’s most important consideration, then next year will give him more opportunities than usual to keep it alive. The debt ceiling, the fiscal 2020 budget resolution, the 2020 appropriations and, if Congress doesn’t do full-year 2019 appropriations in the lame duck, another CR or omnibus, could make the wall a never-ending issue through 2019. That won’t be the case if the wall is funded in the lame duck.

3. In Reality, Trump Is A Federal Budget Wuss. When it comes to the federal budget, Trump is the anti-Teddy Roosevelt: he speaks loudly but carries a very small stick. Time and again he has sworn to shut down the government over funding for his wall only to back down for one reason or another.

The two most recent examples are very instructive. In March, Congress adopted a fiscal 2018 omnibus appropriation without funding for his wall that Trump repeatedly and vociferously promised to veto until, under pressure from members of his own administration and GOP congressional leaders, he signed it. Trump then immediately vowed to never sign another appropriation without funds for his wall and kept insisting he would veto the next CR…until he very meekly signed that this September.

Of course, there are multiple Trump tweets like the ones below threatening a shutdown that have never resulted in the government actually shutting down.

None of this means there won’t be a government shutdown this December, only that there are reasons to think it may not be as probable as many currently believe.

Follow Stan Collender on Twitter at @thebudgetguy.

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GOP Congress Is About To Scam The U.S. On The Budget

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(NOTE: Please don’t @ me with something to the effect of “This is not news, you moron” until you read the next three paragraphs.)

A special joint select committee that has been meeting since March supposedly to propose improvements in the way Congress considers the budget each year is about to recommend changes that will actually make the budget process much worse.

Rather than proposing reforms that will make federal fiscal policy better and the debate more transparent and on schedule so that government shutdowns, fiscal cliffs, continuing resolutions and debt defaults are less likely, the committee is about to recommend procedural changes that just make the federal budget a much less difficult vote for representatives and senators.

In other words, under the pretense of better budgeting, the committee is going to recommend changes that will do nothing other than make Congress’s political life much easier.

Keep in mind that Congress doesn’t actually need a budget process. If they choose to use it, the House and Senate already have all the power they need under Article I of the U.S. Constitution to do whatever they want.

And, contrary to what most members of Congress will tell you, the existing budget process actually works exceptionally well whenever the House and Senate want to do something. Over its 44 year history, the budget process has been successfully used to decrease and increase taxes, spending and the deficit.

But the key in the two previous paragraphs is the word “want.” When it comes to the budget, neither the U.S. Constitution nor the Congressional Budget and Impoundment Control Act, Gramm-Rudman-Hollings or any other law have been able to force members of Congress to do anything — like spending cuts and tax increases — they don’t want or simply refuse to do. There are no effective enforcement mechanisms or penalties for not complying so representatives and senators have ignored the Constitution and laws with absolute impunity.

Enter the Joint Select Committee on Budget and Appropriations Process Reform.

Rather than focus on enforcement, the committee is going to markup a bill with one major recommendation: Instead of the current requirement that Congress adopt a budget every year, the new process will only require that a budget be passed every other year.

The most immediate impact of this change will be that the House and Senate will now only be able to be criticized once every two years either for failing to pass a budget at all (which will still be the most likely legislative outcome) or for voting for a budget with a trilion-dollar-plus deficit.

Representatives and senators will consider either of these a political positive because it will cut in half the number of nonvotes or tough votes they have to take before the next election. But it will be terrible for federal fiscal policymaking.

The two-year budget Congress adopts is very likely to be widely out-of-date by the second year. Congress will then have the choice of adopting an interim budget to reflect the new circumstances and, therefore, making a mockery of the original two-year budget; not approving a new interim budget and having to live with a fiscal plan that is acknowledged to be inappropriate; or ignoring the two-year budget with a jury-rigged process that gets far less scrutiny.

Even worse is that this will make the president’s budget even less relevant than it is already. For example, if the two-year budget requirement were in effect now, the budget the Trump administration is supposed to submit to Congress in February 2019 would have to propose spending and taxes policies that will continue to be in effect until October 1, 2022, that is, almost three years from now.

Still to be decided is whether appropriations would also be changed from one to two years.

The answer is probably, or almost certainly, not. While it would make sense from the perspective of federal agencies and department for which assured, on-time funding would be a boon to better management, it would make no political sense for the appropriations committees because it would cut their power in half.

On top of everything else, there still won’t be anything to force Congress to adopt a budget regardless of whether it is for one or two years.

Of course, the joint select committee won’t say any of this. It has already talked in lofty, holier-than-thou tones about the current budget process being broken.

As with most scams, this is misdirection. The real goal is not better federal budgeting; it’s reducing the political pain for members of Congress.

Follow Stan Collender on Twitter at @thebudgetguy.

Election Results Point To Even Higher Deficits And Big Budget Wars

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The split control of Congress resulting from the 2018 midterm elections is not going to lead to a grand bargain on the budget over the next two years that reduces the federal deficit.

Quite to the contrary, the election results mean that the federal budget will be even more of a hyperpartisan issue than it has been during this Congress and that the deficit is going to increase.

The split control will make it easier for Republicans and Democrats to blame each other for the fiscal sins of the past, the spiking deficits of the future and all of the shutdowns and debt ceiling cliffhangers that will be happening day-to-day.

The Democratic majority will give President Donald Trump an even better political foil than he’s had the past two years if (but more likely when) he doesn’t get what he wants. Instead of just blaming Congress, he’ll be able to criticize the Democrat-controlled House for thwarting his agenda. Even if it’s not true, as far as Trump is concerned, everything from a higher deficit to no wall to no military parade to no space force will be the Democrats’ fault.

The budget bottom line is simple: Senate Republicans will have a very different fiscal agenda than House Democrats, and both houses’ tax and spending to-do lists will be at odds with Trump’s plans. Unless there’s a severe economic crisis that requires a fiscal policy response and allows representatives and senators to abandon their established positions, it’s hard to imagine the three sides being able to agree on much of anything over the next two years on the budget.

Here are my top seven federal budget implications of the 2018 election.

1. Lame Duck Madness. The best chance Republicans now have to do away with the Affordable Care Act and to enact another tax cut will be during the lame duck session of Congress that will begin next week. To do that, however, they first will have to adopt a budget resolution that includes reconciliation instructions to repeal ACA and cut taxes…and the budget resolution and reconciliation bill will have to be adopted before the next Congress begins on January 3. Not including Thanksgiving, Christmas and New Years, that’s only about six weeks to get work done that would normally take three months or more to do. And that doesn’t even include the seven appropriations bills that still have to be enacted by December 7.

2. Trillion-dollar (and rising) Deficits. There will be much talk and lots of finger-pointing but little-to-no action over the next two years on reducing the deficit. It wasn’t going to happen if Republicans retained control of both houses of Congress anyway, but it’s difficult to imagine a scenario where the spending cuts and tax increases acceptable to the GOP will be even remotely acceptable to Democrats.

Unless Wall Street demands changes (the long-expected return of the bond market vigilantes), all of the things most likely to be enacted — think infrastructure — will increase rather than decrease the federal government’s red ink. That means that the latest projections from the Treasury/Office of Management and Budget and Congressional Budget Office showing a more than $1 trillion deficit in fiscal 2019 and 2020 now must be considered minimums.

3. Debt Ceiling Cliffhangers. The current suspension of the federal debt ceiling that expires March 1 will provide yet another opportunity for Trump, Senate Republicans and/or House Democrats to withhold their signature or votes unless they get something they want or to stop something they hate.

The assumption that the Treasury will use the same “extraordinary measures” that have been used in the past to delay the day of reckoning on the debt ceiling may be wrong this time if Trump feels the need to create a crisis that will give him leverage over House Democrats. Even if he ultimately wusses out again and the extraordinary measures are implemented, expect Trump to pound his chest and create uncertainty in financial markets about the debt ceiling in the weeks leading up to the deadline.

Also expect Trump to consider only increasing or suspending the debt ceiling for a short time so he can pound his chest more than once before the 2020 election.

4. Multiple Shutdown Showdowns. The House Democratic majority means that there will now be three players in every appropriations fight and that will tremendously complicate what was difficult negotiations without them.

The negotiations will be even worse if (1) Trump uses them as reelection campaign events and (2) House Democrats and Senate Republicans see a clear possibility that, no matter whether it’s a spending increase or decrease, the other side will be blamed.

It’s hard not to see anything but a continual series of threatened shutdowns under these circumstances. Even if Senate Republicans and House Democrats mutually agree to provide the spending increases the other wants, there will be no guarantee that Trump will go along or that he will sign a bill without demanding his own pound of appropriations flesh.

5. Two Years Without A Congressional Budget Resolution.  Voting for budget resolutions has only been barely politically acceptable for most representatives and senators in recent years because it enabled reconciliation to be used and, therefore, a filibuster to be avoided in the Senate. That’s how the Affordable Care Act and the Tax Cuts and Jobs Act were both put in place even though the Democrats and Republicans, respectively, didn’t have 60 votes.

But with Democrats in control the House and Republicans in control of the Senate, there will be few changes to mandatory programs and taxes that will be acceptable to both houses…so there will be no need for reconciliation. That will make the political pain of voting for a budget resolution and its projected trillion-dollar deficits completely unnecessary.

(For those who think reconciliation will be needed for a middle class tax cut of some kind…First, see #1: It might be done during the lame duck. Second, if there isn’t enough Democratic support in the Senate for what the GOP wants and, therefore, to prevent a filibuster, House Democrats won’t agree to a budget resolution that allows reconciliation to be used.)

6. Lots Of Deficit-Increasing Legislation. If they agree on anything, Senate Republicans and House Democrats will demand equal spending increases or revenue decreases for their pet programs. Trump will then want equal treatment for his priorities. An even higher than currently projected deficit (see #2) will be the result.

7. The Next Trump Budget Will Be Totally Meaningless. Trump’s first two budgets were little more than political campaign brochures masquerading as official government documents.

Trump’s next budget will be even more political. With little likelihood that anything he proposes will be taken seriously by the split Congress and with the president’s own reelection well underway by next February, the Trump 2020 budget will be even less of a serious fiscal plan that won’t be taken seriously on Capitol Hill and won’t last long enough to be a major discussion topic on that weekend’s political talk shows.

Follow Stan Collender on Twitter by clicking here on @thebudgetguy.

Don’t Completely Discount Trump’s Talk Of A 10% Tax Cut Just Yet

 

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No matter the topic, Donald Trump has proven again and again both that he’s not very articulate and that his knowledge of the U.S. Constitution, the legislative process in general and the congressional budget process in particular is limited.

That’s why it hasn’t been surprising that those who are closely following the federal budget and the midterm election almost immediately dismissed Trump’s talk of a ten percent tax cut for middle-income Americans in the next two weeks as a desperate campaign stunt rather than a serious proposal. After all, Congress won’t even be in session.

That’s probably still the most likely analysis of the situation, especially because there have been ample reports that the Republican congressional leadership, including the chair of the House’s tax-writing committee, was caught unawares by Trump’s statement and disavowed all knowledge of the plan.

But what if, rather than making an off-the-wall campaign promise that he has no plan to pursue when the election is over, Trump was actually inarticulately stating what he wants to do and how he plans to do it?

The clue might be Trump’s use of the word “resolution” when explaining how he was going to proceed.

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As reported by CNBC, Trump told White House reporters yesterday,”We’re putting in a resolution some time in the next week and a half to two weeks [and] we’re giving a middle-income tax reduction of about 10 percent.” (emphasis added)

Trump’s use of the word “resolution” might be due to his lack of understanding of how Congress works. But it’s curious that he didn’t use a simpler and more common word like “bill,” legislation,” or “proposal” to describe what he was going to put in.

This is particularly interest because “resolution” has a special meaning in the congressional budget process. Using a “budget resolution” as the first step on the path to the tax cut would make it much much easier to enact.

As I explained in this post yesterday, Congress adopting a budget resolution could prevent the new Trump tax plan from being filibustered in the Senate because that would enable it to be considered with reconciliation, the same procedure used to pass last year’s tax bill.

That’s not to say that going the budget resolution route would be easy or politically painless, but it could work. Here’s how I described it in my post yesterday;

“The process could be expedited if the House passed the budget resolution already adopted by its budget committee, if the Senate then agreed to what the House passed with an amendment requiring reconciliation, if the House then passed the budget resolution with the Senate amendment, if the House Ways and Means Committee quickly adopted the Trump plan, if the full House quickly passed what the committee approved and if the full Senate bypassed its Finance Committee and adopted the House-passed bill without making any changes.”

It’s not at all hard to imagine Trump being briefed by his staff on this very complicated procedure and that he then garbled what he was told when he described his tax plan to reporters.

Then again, it’s also very possible that there really is no tax plan of any kind.

Follow Stan Collender on Twitter by clicking here @thebudgetguy.