Legislative / Policy Update
Congressional Schedule. The House and Senate are in recess and will reconvene next week. Before leaving town, both chambers passed a package with the seven remaining FY 2019 appropriations bills, which the President signed on Feb. 15, avoiding another government shutdown.
The Return of the Caps. Now that Congress has finally finished work on the spending bills for FY 2019, which began five months ago on Oct. 1, 2018, attention will turn to FY 2020 and what to do about the budget caps.
A little history: In 2011, President Obama was in the White House and Democrats held the Senate, but Republicans, led by Speaker John Boehner, controlled the House. The debt ceiling stood at $14.3 trillion and needed to be raised. Republicans demanded that Congress enact a commensurate amount of deficit reduction in return for their votes to raise the debt limit. There was prolonged debate, with Democrats arguing that revenue increases should be part of the solution to reduce the deficit.
After lengthy negotiations, lawmakers agreed in August to pass the Budget Control Act (BCA) of 2011, raising the debt ceiling by about $2 trillion and promising an equal amount in deficit reduction over 10 years. The $2 trillion increase in the debt limit was calculated to be sufficient to pay the government’s bills through the end of 2012 so that lawmakers would not have to go through another budget battle right before that year’s elections.
To curb federal spending, the BCA set up a two-step process: Almost $1 trillion would be saved by establishing caps for defense and non-defense discretionary spending through FY 2021, and another trillion in savings would be proposed to Congress by a 12-member, bipartisan Super Committee. The Super Committee, however, failed to reach an agreement by its November deadline, so an additional $1 trillion was shaved off the budget caps.
To enforce these spending limits, the BCA provided that if future Congresses passed annual appropriations bills that exceeded the caps, there would be automatic, across-the-board cuts (i.e., sequestration) to bring spending within the BCA limits.
Lawmakers on both sides of the aisle have never been enamored with the caps. In general, Republicans have argued that more funds are needed for defense spending, while Democrats have countered in support of non-defense increases. Consequently, Congress has passed bipartisan legislation every few years to raise the caps.
First, there was the Bipartisan Budget Act of 2013, which increased the caps by $45 billion in FY 2014 and $19 billion in FY 2015. Next was the Bipartisan Budget Act of 2015, which increased the caps by $50 billion for FY 2016 and $30 billion in FY 2017. In both cases, the increases were about the same for defense and non-defense. And then there was the Bipartisan Budget Act of 2018, which added the biggest increases thus far -- $143 billion for FY 2018 ($80 billion for defense and $63 billion for non-defense) and $153 billion for FY 2019 ($85 billion for defense and $68 billion for non-defense).
Now Congress is beginning the FY 2020 budget process and is looking at reductions of 11% and 9%, respectively, in defense and non-defense spending if the caps are not increased.
Technically, the President’s budget proposal, which kicks off the process, is supposed to be released on the first Monday of February, which was Feb. 4 this year. However, because of the government shutdown and the prolonged battle over FY 2019 spending, the budget proposal has been delayed. It now appears that the Administration will release its FY 2020 budget in two parts. Summary tables and top priorities will be released March 11, followed a week later by detailed budgets for each agency. White House officials say the President’s budget will include cuts of at least 5% in non-defense spending.
There has been no indication of when the Administration and Congressional leaders will sit down to discuss the budget caps, but keep in mind that the debt limit also needs to be addressed. The February 2018 budget deal suspended the debt limit through March 1, 2019, at which point the Treasury Department will use extraordinary measures to meet federal obligations. Thus, a drop-dead deadline for action on the debt limit can likely be postponed until at least August. Lawmakers are hoping that a deal on the budget caps can be reached as soon as possible and well before August.
Big Picture. Twelve candidates have announced their candidacy to be the Democratic nominee for President in the 2020 election, making this the deepest Democratic primary field since the 1972 and 1976 primaries, which had 16 serious candidates. The Democratic National Committee has been gearing up for a crowded field and announced on Feb. 14 they will be expanding their primary debates to a total of 12 (six in 2019 and six in 2020), with the top 20 candidates being eligible to participate.
Candidates and potential candidates have started to trudge across the early primary states. Candidates Booker, Buttigieg, Warren, Gabbard, Yang, Gillibrand, Klobuchar, Delaney, and Castro all campaigned or announced dates to campaign in Iowa in February. In addition to the announced candidates, former Colorado Governor John Hickenlooper and current California Congressman Eric Swalwell are slated to appear in Iowa this week.
On Friday, President Trump received a primary challenge from former Massachusetts Governor Bill Weld, who announced he was forming an exploratory committee to seek the Republican nomination. President Trump enjoys 92% approval rating among those who voted for him in 2016, according to the most recent Fox News poll.
Last night Sen. Klobuchar went on CNN for a town hall style interview. In the interview she discussed a more centrist approach to governing with an eye on improving the Affordable Care Act, reforming student loan programs, re-entering the Paris climate agreement, and holding the Green New Deal as an aspiration but not a legislative mandate. Sen. Harris was the first Democratic candidate to appear on the CNN 2020 town hall circuit (on Jan. 28), which will likely feature the top candidates over the next few months.
Candidates who have announced or formed an exploratory committee.
Congress is back in session this week, giving lawmakers an opportunity to weigh in on the developments in Iraq and Iran. Tuesday the Senate Finance Committee will take action on the USMCA, but floor consideration is yet to be decided. On the political front, year-end fundraising totals have been tabulated for the presidential candidates.Read More