The House and Senate cleared a one-week FY17 continuing resolution (CR) funding the federal government through next Friday, May 5. The new CR also extends the December CR provision for health care benefits for retired coal miners and their dependents. President Trump said earlier this week that he would sign a one-week CR

The House passed the measure this morning by a vote of 382 to 30 (16 Republicans and 14 Democrats voted against the CR), and the Senate followed soon after passing it by a voice vote. On Thursday evening, the Senate had attempted to deem the measure passed by unanimous consent once approved by the House, but Senate Minority Leader Chuck Schumer (D-NY) objected. His move forced the Senate to stay in session on Friday to vote on the CR by voice vote.

House and Senate Republicans and Democrats continue to negotiate the details of an FY17 omnibus appropriations bill. House Minority Whip Steny Hoyer (D-MD) said that Speaker Ryan plans to have the FY17 omnibus spending bill introduced by Monday night with the goal of a House floor vote on Thursday, May 4.

One sticking point in the negotiations is a shortfall in Medicaid funding for Puerto Rico. Democrats are pushing for a funding fix as part of the FY17 omnibus spending deal, but the Trump Administration has resisted. Without the fix, Puerto Rico could exhaust its entire $6.4B Medicaid allocation by this fall. It was supposed to last through FY19.

Another issue holding up the measure was the potential for a vote in the House this week on a measure to repeal the Affordable Care Act (“Obamacare”). Democrats in the House had warned that they would vote against the one-week CR if Republicans revived their health care bill.

President Trump made two concessions this week to get negotiators closer to a final agreement on the FY17 spending bills. The President said he would forgo FY17 funding for construction of the U.S.-Mexico border wall and instead would pursue the funding in the FY18 appropriations process. He also agreed to continue to make payments for health insurance subsidies created under Obamacare that help reduce out-of-pocket costs for those in the individual marketplace. The subsidies face a court challenge, so it is unclear how long the President will continue to provide them.

FY17 Continuing Resolution:

https://www.congress.gov/115/bills/hjres99/BILLS-115hjres99ih.pdf

President Trump’s Treasury Secretary Steve Mnuchin and Chief Economic Advisor Gary Cohn outlined the administration’s tax reform plan this week. The plan was light on details and left a lot of questions unanswered. The one-page summary was as follows:

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual and Business Tax Cut In American History

Goals For Tax Reform

• Grow the economy and create millions of jobs
• Simplify our burdensome tax code
• Provide tax relief to American families – especially middle-income families
• Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

• Tax relief for American families, especially middle-income families:
  • Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%
  • Doubling the standard deduction
  • Providing tax relief for families with child and dependent care expenses
• Simplification:
  • Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
  • Protect the home ownership and charitable gift tax deductions
  • Repeal the Alternative Minimum Tax
  • Repeal the death tax
• Repeal the 3.8% Obamacare tax that hits small businesses and investment income

Business Reform

• 15% business tax rate
• Territorial tax system to level the playing field for American companies
• One-time tax on trillions of dollars held overseas
• Eliminate tax breaks for special interests

Process

• Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that provides massive tax relief, creates jobs, and makes America more competitive – and can pass both changers.

The President’s tax outline received a mostly lukewarm reception from Republicans. Conservatives are concerned about adding to the national debt as some analysts have said that the plan could add trillions of dollars in new debt over the next decade. Administration officials claim that the economic growth stimulated by the tax cuts would offset the costs. The administration believes that economic growth would be at 3% or higher, while the Congressional Budget Office projects growth under 2%.

The President’s plan did not include a border adjustment tax proposal supported by House Speaker Paul D. Ryan (R-WI). That tax is estimated to raise $1.2T over 10 years, which could help pay for the lower tax rates in the President’s proposed tax reform.

House and Senate Republicans said that the President’s outline would serve as “critical guideposts” as they pursue tax reform legislation. The White House plans on holding listening sessions with stakeholders on the emerging tax package.

While the President had once considered linking a $1T infrastructure bill to tax reform, there was no mention of infrastructure funding during the rollout this week.

The FY17 continuing resolution (CR) expires next Friday, April 28. Congress returns next week from a two-week recess and has just a few days to either pass another CR or a full-year omnibus for the 11 remaining FY17 appropriations bills. Negotiations between the House and Senate and Democrats and Republicans have occurred during the recess, but a final agreement hasn’t been reached yet. It isn’t clear which chamber will move the funding bill first. Some House appropriators prefer the Senate acting first. In the meantime, there may be a need for another one- or two-week stopgap CR to fund the government until they can get an omnibus passed. Today the Office of Management and Budget sent shutdown guidance to federal agencies.

On March 16, President Trump requested an additional $30B in FY17 funds for defense ($24.9B for the base budget and $5.1B in Overseas Contingency Operations) and $3B for border security of which $1.4B was for the southwest border wall. The final omnibus bill could include $15B in OCO funding for defense, but Democrats are pushing for a comparable increase in nondefense war-related funds. While the latest negotiation offer did not include the $1.4B for the border wall because of Democrats’ (and some Republicans’) opposition to the project, Sean Spicer said this week that border wall funding is a priority for the administration.

In addition to the overall funding levels and funding for the border wall, some other potential sticking points for the FY17 omnibus include:

• The West Virginia congressional delegation wants to see a provision that would ensure the continued health coverage for retired coal miners and their spouses.
• Office of Management and Budget Director Mick Mulvaney opposes the appropriation of funds for cost sharing subsidies for health insurers to lower out-of-pocket costs for individuals who buy silver plans through a health care exchange.
• Mulvaney has also been urging Republicans to include a provision blocking federal grants for any city that does not enforce federal immigration law (“sanctuary cities”).

The House convenes on Tuesday making it difficult for them to abide by their three-day rule in which they make the text of the bill public three days before bringing the legislation to the House floor. While they can forgo this rule for the omnibus, it is likely that a short-term CR will be necessary to avoid a shutdown. And there is always the possibility of Congress punting on all FY17 bills and just passing a year-long CR.

The current FY17 continuing resolution (CR) expires on April 28 leaving only one week for Congress to act on it when they return from recess in order to avoid a government shutdown. Eleven of the 12 FY17 appropriations bills are currently funded under the CR. Some key sticking points in the negotiations are the supplemental funding requested by President Trump in March for the southwest border wall and funding for key Obamacare programs. Democrats are in favor of the latter, but not the former. Democrats could also block the omnibus if it includes riders or “poison pills” such as language barring federal grants from going to “sanctuary cities.” A long-term spending deal for FY17 will need some Democrat support to get through the Senate. When asked, White House spokesman Sean Spicer would not rule in or out a veto by President Trump if an FY17 spending deal does not include funding for the border wall. Office of Management and Budget (OMB) Director Mick Mulvaney echoed the concern about a veto saying this week, “The President has to sign off on this stuff. The President needs to see his priorities funded if he’s going to be participating in signing these bills.” As for the FY17 supplemental funding requested by the President for the Department of Defense, House Armed Services Committee Chairman Mac Thornberry (R-TX) is pressing appropriators to allow the Pentagon to roll over into FY18 any supplemental funds appropriated for FY17 giving them more time to spend it before the end of the fiscal year on September 30.

The current FY17 continuing resolution (CR) funding the federal government expires on April 28. With the House and Senate in recess the next two weeks, that leaves only one week for them to pass a spending bill when they return. Discussions are currently underway between House and Senate appropriators. House Minority Leader Nancy Pelosi (D-CA) said that there are more than 100 unresolved issues remaining in these talks.

Appropriators also need to consider the supplemental funding request the Trump administration submitted to Congress last month. Rep. Kay Granger (R-TX), Chair of the House Defense Appropriations subcommittee, said that she did not expect the full $30B defense supplemental funding request to be added to the FY17 omnibus spending bill. Democratic appropriators have warned that including the President’s supplemental funding request could doom an FY17 spending deal. And some Republicans have already dismissed the $18B in domestic discretionary spending cuts that were also proposed by the President. While the FY17 supplemental will likely have to be considered separately from the FY17 omnibus, it is unclear if the Administration will veto the final spending bill if it doesn’t include his supplemental funding request.

With time running out, there is the possibility of another weeklong FY17 CR to buy some time before the House and Senate can complete an FY17 omnibus spending bill.

After failing to invoke cloture on the nomination of Neil Gorsuch to be an Associate Justice of the Supreme Court of the United States by a vote of 55 to 45, Senate Republicans invoked the “nuclear option.” A vote on the ruling of the Chair removed the 60-vote threshold necessary to avoid a filibuster, ensuring that future Supreme Court nominees can advance on a simple majority vote. That historic vote was along party lines with all 52 Republicans in support. Another vote to invoke cloture was then voted on, and it was agreed to by a roll call vote of 55 to 45. Joining the 52 Republicans in the vote to invoke cloture were Sens. Donnelly (D-IN), Heitkamp (D-ND), and Manchin (D-WV). Gorsuch is the first Supreme Court nominee to be filibustered since 1968. His confirmation vote is expected sometime Friday evening.

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/