Quick Hit – December 4, 2017

Republican and Democrat leadership appear committed to averting a government shutdown. 

Despite our headline above, we’ve laid back on trying to interpret or predict the future in Congress over the past couple of weeks. The dynamics have been unusual to say the least, and it has taken some time for the fog of ideological battles to dissipate.

What’s Happening Now?

This weekend Capitol Integration participated in the 5th Annual Reagan National Defense Forum, a gathering of 750 national security leaders from Congress, government and industry. A full list of panel participants and speakers may be found here: https://www.reaganfoundation.org/media/130110/rndf-conf-part_112917.pdf.

Since the last Quick Hit, Congress appears to have settled on a 2017 endgame that will lead to an FY18 Omnibus appropriations bill.  Here’s the quick update of where we are:

  • President Trump is expected to sign FY18 National Defense Authorization Act into law in the coming days; the bill was passed to the President from Congress 30 November. It authorizes defense funding at nearly $700B across base and OCO budgets.
  • The House and Senate have each passed their versions of a tax bill. Far short of the “tax reform” many hoped for, it has the potential to be the most significant change to tax policy since 1986. The tax bill must complete conference by the end of calendar year 2017 in order to use the specialized voting mechanism that accompanies the reconciliation process – a 51-vote threshold vs. a 60-vote threshold.
  • The Senate Appropriations Committee released its version of the FY18 defense appropriations bill the Wednesday before Thanksgiving. It marked to a number about $50B below what many had hoped for and what the House Appropriations Committee had marked to.
  • The present Continuing Resolution will expire 8 December. Expect another short-term CR to fund the government through 22 December. This CR is intended to allow Congressional leadership to finally agree on a topline budget number for defense and domestic spending. The NDAA sets a solid target that “defense hawks” hope to reflect in appropriations ($700B).  As mentioned above, the Senate is still short of that target today.  This means there will be some negotiation about comparable increases on the domestic side of the budget. Expect some flash and bang in the headlines, but look for a compromise to emerge.
  • Yet a third CR will then be agreed to fund the government from 23 December into mid-or-late January.  This CR is intended to create negotiating space for the final tax bill, as well as some incorporation of immigration legislation (border wall, Dreamer Act, etc.) into a final Omnibus.

The potential exists for substantive Congressional victories on tax policy, budget and appropriations as we transition into calendar year 2018 and Fiscal year 2019 positioning.

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