November 21, 2017

Congressional leaders are trying to negotiate another two-year budget deal by the end of this month to adjust the statutory caps on annual discretionary appropriations under the Budget Control Act to allow an omnibus appropriations bill for fiscal 2018 to be written and passed. Amounts under discussion would be an increase of over $90 billion per year from current law – resetting the caps back to what they were in August 2011, before the “SuperCommittee” (Joint Select Committee on Deficit Reduction) failed to find even one dollar of the $1.2 trillion in spending cuts that the BCA tasked it with finding, which then forced substantial reduction in the spending caps after 2013.

The proposal, first reported by CQ, would reverse the reductions in the annual spending caps caused by the SuperCommittee’s failure. Previous budget deals in 2013 (for FY 2014-2015) and in 2015 (for FY 2018-2019) increased the spending caps once again, offsetting the cost of the cap increases with spending cuts or revenue increases on the other side of the budget. But such deals get steadily more expensive – the 2013 deal was $63 billion in cap increases, the 2015 deal was $80 billion, and the deal being discussed last week would top $180 billion.

Where non-defense appropriations are concerned (which includes all transportation appropriations in the annual bills), the current law cap is not that far from the House and Senate spending plans – the cap needs to be increased by almost $3 billion to allow the level of appropriations recommended by the Senate Appropriations Committee in its 12 bills this year. (The House bills total $5 billion less than the cap amount). But the House appropriators wrote bills that are an astounding $72.4 billion above the FY18 cap on defense spending, and something obviously has to give.

The mismatch between the Trump Administration/Armed Services Committees huge wants on the defense side, and the consistent Democratic demand for 50-50 parity in any cap increases between defense and non-defense, may make going back to the original 2011 caps the easiest way out. Republican negotiators want as much of a defense increase over the current cap levels as possible with as little non-defense increase as they can get away with, while Democratic negotiators want as much of a non-defense increase as possible.

Cast your memories back to the first week in August 2011. In the House, Democratic leaders Nancy Pelosi (D-CA), Steny Hoyer (D-MD), and Nita Lowey (D-NY) voted in favor of the original BCA cap levels. In the Senate, Democratic leaders Chuck Schumer (D-NY), Richard Durbin (D-IL) and Richard Leahy (D-VT) voted in favor of the original BCA cap levels. And it was President Obama who negotiated those original cap levels and signed them into law.

Going back to those cap levels that were in the original BCA in August 2011 would give Republicans a win because the revised 2018 number would be a $54 billion increase over the current-law cap, which is not quite the $72 billion they wanted but is a tremendous amount of spending increase in incremental terms. (Plus, there is a cap work-around for defense that does not exist for non-defense). And while Democrats would lose on the strict 50-50 parity measure, they would be getting far more money for non-defense than either the House or Senate appropriations bills would have provided, and they could legitimately claim a victory on getting rid of the effects of what is commonly-but-incorrectly referred to as sequestration in the appropriations process for the first time in five years.

Reverting back to the original BCA cap levels would provide much more money for non-defense appropriations than either the House or Senate Appropriations Committee bills have currently provided for 2018 – $42.3 billion more than the House bills and $34.5 billion more than the Senate bills.

That could mean that the Transportation-HUD portion of a FY18 omnibus spending bill, for example, could wind up with more money than either the House or Senate bills currently provide. This would eliminate the need for the House bill’s $800 million highway rescission, its elimination of the TIGER program, and its cuts to mass transit new starts, while also allowing more funding for other kinds of grant programs (like the new passenger rail grant program that got $500 million in the House bill, all devoted to the New York/New Jersey Gateway program).

But any such cap increases have to pass both chambers (with 60 votes in the Senate) and be signed into law, and there are a lot of hurdles between now and then, many of which are related. One logical vehicle for enactment of a cap adjustment would be the next appropriations vehicle that has to pass by midnight on December 8 to prevent a government shutdown and a debt limit problem.

1. Offsets. As noted above, the previous two deals to increase the spending caps were completely paid for by future mandatory spending reductions or revenue increases (though the complaint about paying for real spending increases now with the promise of future savings a decade hence is a valid one). The universe of gimmicks and relatively pain-free offsets that could be applied to this purpose has been greatly depleted by previous deals. CQ reported that the Administration is amenable to increasing the caps without having the full amount of the cap increase offset by other spending cuts or revenue increases. Failing to offset much of the cost of the cap increases would lose some Republican (and a few Democratic) votes that are concerned about overall spending levels. (The intersection of a $1.5 trillion budget-busting tax cut bill happening at the same time might be a bridge too far for some R’s.) And as mentioned above, any offsets that come close to paying for a $180 billion spending increase would also certainly drive away a critical mass of votes.
2. Hurricanes and wildfires. As noted elsewhere in this issue, the Administration last week requested another $44 billion in emergency appropriations for relief efforts and activities relating to Hurricanes Harvey, Irma and Maria and for wildfires in the western U.S. The Administration included a list of potential offsets for the money that included several likely candidates for offsets for a cap increase. One logical vehicle for enactment of a cap adjustment would be the next appropriations vehicle that has to pass by midnight on December 8 to prevent a government shutdown and a debt limit problem – but this is also a likely candidate for the next round of hurricane aid. The act of offsetting emergency spending (which doesn’t really require an offset) but not offsetting cap increases that allow non-emergency spending, may be too much for some members. An agreement on current and future emergencies may be a quid pro quo for some members in the cap discussions.
3. DREAM. The original CQ reporting indicated that an extension of the DACA deferred-enforcement program for non-citizens brought to the U.S. without legal permission while children would not be a part of any budget deal. But even if Democrats are handed victory on tens of billions of dollars of fiscal issues (huge non-defense spending increases, maybe more money for hurricanes, no painful offsets), it is an open question whether or not the House Democratic Caucus will allow itself to spell “victory” without “D-R-E-A-M”

Any such deal will have to have its most important parameters (the big defense and non-defense numbers for 2018) at least a month before Congress could consider a final, yet-to-be-written omnibus appropriations bill.