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Congress, Continuing Resolutions and Continuing Crisis

- January 2014

During budget talks in the summer of 2011, President Obama and Speaker Boehner began serious conversations to see if they could negotiate a “grand bargain” to deal with the country’s fiscal crisis. These were meaningful discussions of entitlement and tax reform – the first in many decades – and both the President and the Speaker were willing to discuss policy changes that their respective constituent groups would oppose: Medicare reform and revenue increases were both on the table.

Unfortunately, those negotiations fell apart with no “bargain” achieved. There are conflicting reports on why the negotiations collapsed, but the report most widely credited is that the President moved the goal post on taxes, demanding new revenue of $1.2 trillion, 50 percent more than the $800 billion that the Speaker had already agreed to. Whatever the reason, no serious discussions of the country’s fiscal crisis were to occur again.

The collapse of the Boehner-Obama talks led to the enactment in August of the Budget Control Act of 2011 (BCA). The BCA created a “Super Committee” tasked with the mission of reaching an agreement, by that December, on an overall budget and debt ceiling compromise. Should the Super Committee fail, automatic across-the-board spending cuts – the “sequester” – would begin in 2013. It was assumed that pro-defense Republicans and pro-social spending Democrats would ensure the success of the Super Committee to protect their favored programs from the sequester cuts. The assumptions were wrong, the Super Committee failed to reach an agreement, and the long-term spending fight that eventually led to the October, 2013 shutdown was set in motion.

Congress struggled through the budget process in 2012, failing for yet another year to pass a budget or the statutorily-required appropriations bills, and passing last-minute Continuing Resolutions to keep government funded. One notable accomplishment of the year was that Congressional Republicans refused to acquiesce to Democrat and White House demands that they set aside the across-the-board cuts in discretionary spending – the sequester – which were set to begin in 2013.

Their track record in 2013 was not much better. Although each house of Congress did pass a budget resolution in April, the first in four years for the Senate, they passed not a single appropriations bill. Nor were there any negotiations on the bigger fiscal issues facing the country.

As the September 30th, 2013 end of the fiscal year neared, Congress was again faced with having to pass a “continuing resolution” (CR) to fund the government. Passing CRs had become standard practice in recent years, but last year Washington was a different place and standard practice was turned on its head.

The Congressional elections in 2012 had resulted in the addition to the GOP caucuses in the House and Senate a significant number of new “Tea Party” conservatives determined to oppose “business as usual” in Washington. These new and larger “Tea Party” conservative blocs in both the House and Senate demanded not only that the budget caps and sequester cuts enacted in 2011 be protected, as they had been previously, but also that Obamacare be defunded in the spending bill. And they said they were willing to shut the government down if their demand was not met.

The “defund Obamacare” mission was Quixotic and doomed to fail from the outset. Very little of Obamacare is controlled by the appropriations bills; most of its spending is in the mandatory, not the appropriated, spending accounts, and none of its tax increases could be repealed in a spending bill. And the Obamacare exchanges were on schedule to open the day the government would shut done, an irony that had no impact on the “defund” leaders.

Enough House conservatives joined the “defund Obamacare” effort to deny Speaker Boehner the votes he needed to pass a continuing resolution to keep the government open. Instead, they insisted that the House send to the Senate a CR that theoretically defunded the health care law. They argued that if the Senate Democrats rejected that CR, the Democrats and the President would be blamed for the government shutdown that would result – an argument dismissed by the Democrats, who correctly predicted that it was the Republicans who would be blamed for a shutdown.

The Speaker was left with no options: if he was ever to find the votes to pass a CR, he could only do so after demonstrating to his Tea Party caucus members that their strategy would not work.

On October 1st the new fiscal year started with no government funding appropriated, and much of the government ground to a halt. But a far more serious challenge confronted the Administration and Congress: on October 17th the U.S. would reach the limit on the amount of debt it could incur if Congress failed to extend the statutory debt limit. Although Congress has never risked U.S. default by refusing to lift the debt ceiling, it is rarely an easy accomplishment, and the new breed of Tea Party conservatives made the task measurably more difficult.

As the shutdown dragged on and the debt limit deadline neared, the Republican “brand” took a beating in the polls as the Party was widely – and predictably – blamed for the mess in Washington. Finally, the weekend before the debt ceiling would be reached, the White House at long last conferred with Senate Democrat and GOP leaders to find a solution. Since House conservatives were still prepared to deny Speaker Boehner a majority vote for any compromise measure, House Republicans were not included in the negotiations. The White House and Senate came to agreement on a compromise, which then passed both houses of Congress, with House Democrats providing sufficient votes to make the Tea Party votes irrelevant. The bill was signed by the President only hours before midnight on October 16th.

While the CR deal ended the shutdown, its enactment was only the beginning of the next phase of the ongoing partisan stalemate: the compromise bill funded the government only into mid-January, extended the debt limit only into mid-February, and instructed the House and Senate to begin the process of “conferencing” their widely disparate budget resolutions and to report back an agreement by December 13th.

The December compromise, and what’s in store for 2014:

The Budget Committee Chairs, House Republican Paul Ryan (R-WI) and Senate Democrat Patty Murray (D-WA), are far apart ideologically, and few pundits held out much hope that they would reach agreement. The pundits were wrong, and the negotiators did reach agreement. Their “Bipartisan Budget Act of 2013” called for more spending than the House or Senate Republicans wanted, but less than the Senate Democrats and White House were calling for. It did not raise taxes, a major win for the GOP, but accommodated Democrats by omitting entitlement reform. It increased defense spending to satisfy defense hawks, but did so by replacing some of the sequester automatic spending cuts, a move conservatives adamantly opposed. In other words, their proposal was a bipartisan compromise – rare in Washington today.

The bill set spending levels for both Fiscal Years 2014 and 2015, and it is hoped that Congress will now return to “regular order” and the normal appropriations process by which they are supposed to approve government spending, and that we can get through a year without brinksmanship and another government shutdown threat.

Notably, a significant majority of House Republicans rejected calls from Tea-Party conservatives to oppose the measure, and voted with Speaker Boehner to pass it. (In the Senate, most of the GOP minority opposed the compromise, but those votes were less critical since the Democrat majority would have the votes to pass it.)

The compromise took budget and spending issues effectively off the table well in advance of the January 15th deadline. However, Congress must still pass appropriations bills to implement the agreement, and they still face the need for another debt limit extension as early as mid-February. Refusing to extend the debt limit and risking U.S. default on our debt has always been a bridge too far for Congress, so it is expected that the limit will again be extended. On the other hand, there is a whole new breed of politician in Washington today, so what is expected could well prove elusive again.