November 25, 2019
Déjà vu with a Twist
On December 21, 2018, President Trump forced a record-setting 35-day partial government shutdown to gain political leverage over Congressional Democrats, fund his border wall construction plan, and mobilize Trump’s political base. At the time, we argued that Trump’s plan would backfire because he made the decision AFTER the Senate had approved a plan avoiding a shutdown based on White House staff assurances to Senate Majority Leader McConnell (R-KY) and House leaders that Trump would sign the bill. That pivot created a significant problem for Congressional leaders. Who in the Administration can negotiate on President Trump’s behalf? The shutdown debacle removed Acting White House Staff Director Mulvaney’s name from that list. Since then, two names have emerged: Treasury Secretary Mnuchin and US Trade Representative Lighthizer.
In July, Mnuchin and Speaker Pelosi were the two central negotiators for the Bipartisan Budget Act of 2019 (BBA19). Their agreement extended the federal debt limit beyond the 2020 elections, eliminated a roughly 10% sequester on federal agencies beginning October 1st, put a two-year budget framework in place, and reduced pre-election shutdown prospects. Lighthizer was the central negotiator for the United States-Mexico- Canada trade agreement (USMCA) that has earned bipartisan support in both the House and Senate.
BBA19 creates the blueprint for an FY20 spending deal. The question is whether the President and Congress can follow it. With a looming impeachment vote, we think adoption of a deal is unlikely until after the Senate votes on any House-passed articles of impeachment. That’s unlikely to occur before mid-February.
In addition to FY20 appropriations, Congress has a lot on its platter, including drug pricing legislation, tax extenders, the National Defense Authorization Act (NDAA), and legislation implementing USMCA. Despite signals from the White House and Congressional leadership staff that there are sufficient votes in Congress to approve USMCA, rising political tensions in the run-up to the House impeachment votes make it difficult for the House to do much substantive legislative work and easy for Democrats to vote against Trump priorities. Based on discussions with Congressional leadership and Committee staff, impeachment threatens to delay votes on these measures until next year.
This week, the House and Senate passed and President Trump signed a continuing resolution (CR) funding the government until midnight December 20th. On Tuesday, the bill passed the House 231- 192. On Thursday, the Senate voted 74-20 to pass the bill.
The CR includes an additional $7.3 billion for the 2020 Decennial Census, increases for Indian Health Service operations, $30 million for Ebola response, apportionment authority for the Commodity Supplemental Food Program, and a military pay raise. The bill repeals a pending $7.6 billion cut to highway funds for states. It includes HHS extenders, and extensions for the USA Patriot Improvement and Reauthorization Act of 2005 and the Intelligence Reform and Terrorism Prevention Act of 2004.
Adoption of the CR creates a potential political train wreck on December 20th. The expiration date for the second FY20 CR coincides with Speaker Pelosi’s timetable for House votes on articles of impeachment.
So what happens at midnight December 20th?
First, we expect the House and Senate to pass a third CR funding the government into calendar year 2020. House and Senate Leaders will present their memberships with a Hobson’s choice: pass a CR to keep agencies operating on automatic pilot or pass nothing and shut down the government.
Second, there remains a possibility that Trump forces a shutdown in response to the expected House impeachment votes. Here’s the twist. With Trump focused on impeachment, why take any action that could alienate Republicans he needs to oppose impeachment and removal? Another shutdown increases political pressure on Senate Republicans representing states likely to support the Democratic nominee in the 2020 Presidential election. It would be foolish for President Trump to give Senator Gardner (R-CO) (who faces a tough 2020 election against a strong Democratic candidate, presumably former Governor Hickenlooper) and others a reason to consider supporting impeachment. For Trump, the Senate votes on impeachment are the most important of his Presidency.
We expect federal agencies to continue operating under CRs based on FY19 enacted levels with some anomalies for mission-critical systems and programs (like the 2020 Decennial Census) through February 2020. With an election approaching, Democrats and Republicans in Congress have a powerful incentive to finalize an FY20 spending deal by March. Republicans want to deliver on the defense spending increases they supported in BBA19 and Democrats want to deliver on their non-defense spending increases.
For similar reasons, we expect federal agencies to begin FY21 operating under CRs based on FY20 levels with few anomalies through November 2020. After the elections, a lame duck Congress will determine whether to complete action on those bills or defer those decisions to the next Congress and, potentially, the 46th President.