As of today, the House is scheduled to be in session 8 days and the Senate is scheduled to be in session 10 days before the current FY17 continuing resolution (CR) expires on April 28.

House Speaker Paul D. Ryan (R-WI) and top Republican Senators said that an FY17 wrapup spending package would start in the House. He also dismissed concerns about the government shutting down when the current CR expires even though House Minority Leader Nancy Pelosi (D-CA) said that there are still 200 unresolved issues on the FY17 spending bills. While Ryan also said that President Trump doesn’t want a shutdown, some White House staff speaking on background have said that the President isn’t concerned about a shutdown as he believes that Democrats will bear full responsibility for it if it does occur. White House Spokesman Sean Spicer said yesterday that they don’t want the government to shut down, but that they do want to make sure that the President’s priorities are being funded. One of those priorities is the supplemental funding the President requested for funding the border wall. House Homeland Security Appropriations Subcommittee Chairman John Carter (R-TX) suggested that there would be some funding in the bill for the border wall, while House and Senate Democrats have said that funding for the border wall would be a deal breaker and are requesting that it be a separate vote.

The Administration recently submitted a request to Congress for an additional $33B in FY17 for the Department of Defense and border security. They suggested that Congress cut $18B in discretionary programs to help offset those costs. Last week, the Office of Management and Budget (OMB) provided to Republican appropriators an outline of $17.935B in FY17 reductions in the 9 following appropriations bills:

Agriculture – $1.070B

Commerce Justice Science – $1.222B

Energy & Water – $1.757B

Financial Services – $210M

Homeland Security – $131M

Interior – $714M

Labor HHS – $7.256B

State Foreign Operations – $2.879B

Transportation HUD – $2.696

With only five months left in the fiscal year, the reductions would have a disproportionate impact on these programs. Many of the proposed FY17 cuts are targeted at programs that are also targeted in President Trump’s FY18 budget outline. More details on the proposed cuts can be found at:

https://www.vantagepointstrat.com/fy17-reduction-options-from-white-house-3-23-17/

The President signed another Executive Order (EO) this week establishing the President’s Commission on Combating Drug Addiction and the Opioid Crisis. President Trump appointed New Jersey Governor Chris Christie (R-NJ) as the Chair of the Commission. Other members of the Commission will be selected by the President “so that membership is fairly balanced in terms of points of view.” Commission members will not be paid, but can be reimbursed for travel expenses. The Office of National Drug Control Policy will provide administrative support as well as funds to cover the costs of the Commission. The Commission will study the scope and effectiveness of the Federal response to drug addiction and the opioid crisis and will make recommendations to the President for improving that response. An interim report with recommendations will be due to the President in 90 days (June 27, 2017) and the final report will be delivered by October 1, 2017. Finally, the Commission will terminate 30 days after submitting its final report.

https://www.whitehouse.gov/the-press-office/2017/03/30/presidential-executive-order-establishing-presidents-commission

President Trump released his FY2018 “America First” Budget Blueprint yesterday. This “skinny” budget provides only discretionary funding proposals; mandatory funding and tax proposals will be included in the full budget request submitted to Congress later this spring (likely May). The President’s $1.151T budget request includes a $54B increase to defense discretionary spending offset by $54B in cuts to nondefense discretionary programs.

The President’s budget request vs. budget caps:

• The Budget also proposes to eliminate funding for the following agencies:
  • African Development Foundation
  • Appalachian Regional Commission
  • Chemical Safety Board
  • Corporation for National and Community Service
  • Corporation for Public Broadcasting
  • Delta Regional Authority
  • Denali Commission
  • Institute of Museum and Library Services
  • Inter-American Foundation
  • S. Trade and Development Agency
  • Legal Services Corporation
  • National Endowment for the Arts
  • National Endowment for the Humanities
  • Neighborhood Reinvestment Corporation
  • Northern Border Regional Commission
  • Overseas Private Investment Corporation
  • United States Institute of Peace
  • United States Interagency Council on Homelessness
  • Woodrow Wilson International Center for Scholars

President Trump’s Management Agenda

• Instituted hiring freeze on January 23, 2017
• Signed “Comprehensive Plan for Reorganizing the Executive Branch” Executive Order on March 13, 2017
• President’s Management Agenda Goals – by 2020 federal agencies are:
  • Managing programs and delivering critical services more effectively
  • Devoting a greater percentage of taxpayer dollars to mission achievement rather than compliance activities
  • More effective and efficient in supporting program outcomes
  • Being held accountable for improving performance

President Trump’s Regulatory Agenda

• The President has already taken 3 steps to eliminate some regulations and the Office of Information and Regulatory Affairs within OMB is working to ensure their implementation:
  • Issued a memorandum on January 20, 2017 ordering a regulatory freeze
  • Signed the “Reducing Regulation and Controlling Regulatory Costs” Executive Order on January 30, 2017
  • Signed the “Enforcing the Regulatory Reform Agenda” Executive Order on February 24, 2017

Federal Agencies

(in billions of dollars)

*References to FY2017 spending below reflect the levels provided by the continuing resolution except for agencies/programs funded in the full year FY17 Military Construction-Veterans Affairs appropriations bill.

The President’s FY18 “America First” Budget Blueprint can be found at:

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/2018_blueprint.pdf

Vantage Point Strategies’ more detailed summary can be found at:

https://www.vantagepointstrat.com/wp-content/uploads/2017/03/Vantage-Point-Strategies-FY18-Budget-Request-Summary-3-16-17.pdf

The President submitted an FY2017 supplemental appropriations request to Congress this week requesting an additional $30B for the Department of Defense (DOD) to “rebuild the U.S. Armed Forces and accelerate the campaign to defeat the Islamic State of Iraq and Syria” and $3B for the Department of Homeland Security (DHS) for “urgent border protection activities.” Of the $30B requested for DOD, $24.9B is for base budget activities and $5.1B is considered war-related and falls under the Overseas Contingency Operations (OCO) account. The $24.9B request would require Congress to lift the defense spending budget caps for FY17, so the President requested that Congress “enact non-defense discretionary reductions of $18 billion in FY2017” to offset these supplemental funding requests.

The $3B for DHS would fund the planning, design, and construction of a physical wall along the southern border, and make other investments in tactical border infrastructure and technology. It will also fund increased immigration detention capacity, and the hiring of additional immigration law enforcement officers and agents.

More details can be found in the administration’s letter to Congress requesting the additional funds and in the supplemental budget materials from the DOD Comptroller.

OMB Letter to Congress:

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/amendment_03_16_18.pdf

Defense Supplemental Funding Request Materials:

http://comptroller.defense.gov/Budget-Materials/

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) released their cost estimate for the American Health Care Act (AHCA) this week. Here are some highlights:

Costs:

• Reduce federal deficits by $337Bover the 2017-2026 period ($323B on-budget savings, $13B off-budget savings)
  • Outlays are reduced by $1.2T, while revenues decrease by $0.9T
  • Largest savings are from reductions in Medicaid and eliminating subsidies for non group health insurance
  • Largest costs are from repealing “Obamacare” taxes and fees, and for establishing a new tax credit for health insurance

Coverage:

• Initially in 2018, 14 million more people would be uninsured under the AHCA than under “Obamacare” – most of these are from repealing the penalties associated with the individual mandate
• In 2020 this number would rise to 21 million more uninsured people under the AHCA than under “Obamacare” because of changes to subsidies for insurance purchased in the individual market and to the Medicaid program
• And by 2026, the additional number of uninsured people under AHCA as compared to “Obamacare” would rise to 24 million because of changes in Medicaid enrollment

Stability of Health Insurance Market:

• The individual market would probably be stable in most areas under the AHCA or under “Obamacare”

Effects on Premiums:

• Prior to 2020, premiums for the individual market would increase 15-20% more than they would under “Obamacare”
• After 2020, increases in premiums for the individual market would be lower than they would under “Obamacare”
• By 2026, the increase in premiums in the individual market would be about 10% lower than under “Obamacare”
• These are average premiums – changes in premiums would differ significantly for people of different ages because the AHCA changes the age-rating rules. Under “Obamacare,” insurers can’t charge more than 3X for older enrollees than younger ones. Under the AHCA, insurers would be allowed to charge 5X more for older enrollees than younger ones. This could result in substantially reduced premiums for young adults and substantially increased premiums for older adults.

The full CBO/JCT cost estimate can be found at:

https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/costestimate/americanhealthcareact_0.pdf

FY17 Defense Appropriations Bill Passes House

The House passed a conference report for the FY17 Defense appropriations bill by a vote of 371 to 48 this week, with 141 Democrats voting for the measure and five Republicans voting against it. However, it faces an uncertain vote in the Senate. The Senate is scheduled to be in session only 23 more days and the House 20 more days before the current FY17 continuing resolution (CR) expires on April 28. Additionally, the Senate will be focused on confirming Neil Gorsuch for the Supreme Court before the April recess. The two potential outcomes at this point are an omnibus funding package for the remaining 11 FY17 spending bills plus any supplemental funding requested by the Administration for the military or border wall, or another stopgap measure extending current funding levels through the end of the fiscal year, Sept. 30. If they go with the latter alternative, federal agencies would be unable to start new programs or shift funding priorities from FY16.

FY17 Defense Appropriations Bill Text:

https://appropriations.house.gov/uploadedfiles/03.02.17_defense_-_fy_2017_appropriations_bill.pdf

FY17 Defense Appropriations Explanatory Statement:

https://appropriations.house.gov/uploadedfiles/03.02.17_defense_-_fy_2017_appropriations_bill_-_explanatory_statement.pdf

President to Submit FY18 Budget Request to Congress Next Week

President Trump is expected to submit his “skinny” FY2018 budget request to Congress next Thursday, March 16. However, work on an FY18 budget resolution by Congress will be on hold until after Congress passes legislation repealing the 2010 Affordable Care Act (“Obamacare”). The repeal bill is using the FY17 budget reconciliation process, which needs to be completed before Congress can begin the FY18 budget. The FY18 budget resolution is expected to include reconciliation instructions for overhauling the tax code.

President Trump is expected to request an additional $54B in defense spending in his FY18 budget request, offset by similar cuts in non-defense discretionary spending. This increase would exceed the $549B defense cap set by the Budget Control Act of 2011 and would violate a Senate budget rule. While the rule could be waived, it would require 60 votes in the Senate. This is unlikely to occur, as Senate Democrats would object to any defense spending increase without an equivalent increase in non-defense spending.

The House Appropriations committee released an FY17 defense appropriations conference report this week, which will be consider on the House floor next week. The bill could become the vehicle for all of the remaining FY17 spending bills given the lack of floor time before April 28 when the current continuing resolution expires.

The $577.9B bill boosts funding for the Department of Defense by $5.2B over FY16 enacted levels and is $1.6B over what former President Obama requested for FY16. The bill includes $516.1B in base discretionary funding and $61.8B in Overseas Contingency Operations (OCO)/Global War on Terrorism (GWOT) funding.

FY17 Defense Appropriations Bill Text:

https://appropriations.house.gov/uploadedfiles/03.02.17_defense_-_fy_2017_appropriations_bill.pdf

FY17 Defense Appropriations Explanatory Statement:

https://appropriations.house.gov/uploadedfiles/03.02.17_defense_-_fy_2017_appropriations_bill_-_explanatory_statement.pdf