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Administration and agenda

OFFICE
VACANCY

directing Treasury to label China a currency manipulator.

Consistent with Trump's desire to change the way business is conducted in Washington, he also pledges to act on his first day in office to:

propose a constitutional amendment to impose term limits on all members of Congress;

require that for every new federal regulation, two existing regulations must be eliminated; and

impose a five-year ban on White House and congressional officials becoming lobbyists after they leave government service.

(The Trump Contract with the Voter is available at https://assets.donaldjtrump.com/CONTRACT_FOR_THE_VOTER.pdf)

Budget. While President-elect Trump has vowed to act quickly on repeal of the ACA, it is difficult to see how that can be accomplished outside of reconciliation instructions for FY 2018. “When we win on November 8th, and elect a Republican Congress, we will be able to immediately repeal and replace Obamacare. I will ask Congress to convene a special session,” he said November 1.

An early focus of attention will be the first Trump budget proposal and the congressional FY 2018 budget resolution. As with the past several years under divided government, a main issue will be how to address the Budget Control Act sequester for FY 2018. According to the Congressional Budget Office, the cap on discretionary budget authority originally established by the Budget Control Act is set at $1.156 billion in 2018, though it will be reduced by automatic procedures unless Congress intervenes. CBO said the reduction will total $91 billion for 2018: $54 billion for defense and $37 billion in 2018 for nondefense. Therefore, total budget authority is slated to be $1.065 trillion, split between $549 billion for defense and $516 billion for nondefense. Both Trump and Speaker Ryan want to eliminate the sequester as it applies to defense, but would likely want to maintain the sequester for non-defense spending.

As reported in Politico last month, Speaker Ryan is bullish on using the “budget reconciliation” process to pass significant tax reform. “This is our plan for 2017,” Ryan said, waving a copy of his “Better Way” policy agenda. “Much of this you can do through budget reconciliation.” He said key pieces are “fiscal in nature,” meaning they can be moved quickly through a budget maneuver that requires a simple majority in the Senate and House.

Use of “Budget Reconciliation” to enact legislation involves a two-step process. First, both Chambers of Congress need to pass a concurrent Budget Resolution (requires only simple majority in the Senate) that contains “reconciliation instructions.” These instructions are directions to committees of jurisdiction to change the spending or revenue numbers (or both), and to report back the changes by a date certain. A budget resolution generally is a legislative vehicle that serves as the blueprint for fiscal policy and establishes a framework for consideration of spending and revenue bills for the coming fiscal year. Technically, a budget resolution is a “concurrent resolution” which is binding in the House and the Senate. Because a concurrent resolution is not submitted to the President for signature, it does not have the force of law.

The second part of the process is to pass “reconciliation” bills that adhere to the reconciliation instructions from the budget resolution.

Reconciliation bills can involve changes to spending, revenue, or the debt limit (or any combination of the three). Importantly, these reconciliation bills also only require a simple majority in the House and Senate for passage.

Reconciliation bills carry strict debate time and amendment restrictions, but unlike a budget resolution, reconciliation legislation contains specific spending and revenue policy changes that are signed into law by the President. In the Senate, debate is limited to 20 hours. While only a simple majority is required for passage in the Senate, 60 votes are required to waive violations of the so-called “Byrd rule,” which prohibits the inclusion of provisions that increase the budget deficit for the period outside the budget window, usually a 10-year period. An unlimited number of amendments may be offered and voted upon, even after the 20 hours of debate have expired – a process often referred to as a “vote-a-rama”.

This process is attractive because of the simple majority vote in the Senate, but carries with it restrictions such as the ten-year expiration for titles of the bill that increase the deficit outside the budget window.

It was used by President George W. Bush to pass significant tax cut legislation in 2001 (the “Bush tax cuts”) and is expected to be considered next year for tax reform. Note that the Bush tax cuts were originally sunsetted at the end of ten years due to the Byrd rule. Subsequent legislation passed outside reconciliation process made many of these provisions permanent.

EY

9 | Election 2016

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