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Congressional Fiscal Challenges Abound

As House and Senate Republicans head to a retreat in Hershey, PA, today, the majority party in Congress faces a number of upcoming fiscal challenges. While Republicans hold both the House and Senate, President Obama has promised to veto a number of measures. It appears that if the 114th Congress wants to get anything done, bipartisanship is more important than ever.

Here’s our take on the fiscal agenda and likely outcomes:

  1. Congress is under pressure from all sides to increase spending on defense and non-defense appropriations programs above the statutory “sequester caps” for Fiscal Year (FY) 2016. BPC has written repeatedly about how the sequester levels of spending are too low and do not address the nation’s real budgetary concerns. But Republicans who want to increase defense spending alone will run into serious opposition from the president.
  2. Treasury will not be able to issue new sovereign debt under conventional operations after March 15, but the real confrontation won’t occur until the summer or later, when “extraordinary measures” to pay the nation’s bills are exhausted. As we have in previous debt limit events, BPC will offer detailed analyses on the topic.
  3. President Obama will issue his budget for FY 2016 the first week of February.
  4. Congressional budget committees will produce FY 2016 budget resolutions likely to contain reconciliation instructions to the authorizing committees to make changes in legislation under their jurisdiction in order to hit the deficit and debt targets that the resolutions contain. If the House and Senate pass a budget resolution conference agreement, then the reconciliation process could begin. This may well be a bigger challenge than many realize, but the final product almost certainly will draw an Obama veto.
  5. Congress punted the Medicare physician payment sustainable growth rate issue (commonly referred to as the “doc fix”) last year, extending it until March 31. While leadership of the committees of jurisdiction may continue working to advance a long-term solution (and find ways to pay for its approximately $150 billion price tag), another temporary “patch” seems likely. Congress should look to BPC’s Delivery System Reform Initiative recommendations – many of which will be released next week – to improve coordination, value, and patient choice in health care.
  6. Authorization for the Highway Trust Fund expires on May 31, and while such projects are popular back home, Congress will find it hard to find offsets for the additional money that full extension of the program will cost. While paying for the trust fund by increasing the gasoline tax or imposing of a carbon tax is popular in some quarters, it is a heavy lift politically.
  7. Permanently addressing the temporary incentives in the tax code proved too much for the 113th Congress to resolve, so the “tax extender” provisions that were renewed just weeks ago have lapsed yet again. Congress will extend most of the provisions for calendar year 2015, but look for another delay until year’s end and an increase in deficits.
  8. Appropriations bills theoretically should pose little challenge under current law “caps,” but with many constituencies calling for more funding on both the defense and non-defense sides, it remains unclear whether Congress will have to enact a temporary Continuing Resolution for FY 2016 appropriations before spending authorization expires on September 30.

Congress’ agenda will certainly include attempts to amend the Affordable Care Act (ACA) and the Dodd-Frank law. While negotiations could lead to compromises, both laws will be protected from radical change by the threat of a presidential veto.

Several other legislative provisions remain up in the air—Children’s Health Insurance Program (CHIP) funding, federal nutrition programs, the fate of the Export-Import Bank, and the Federal Aviation Administration re-authorization all need action before year-end.

The relationship between President Obama and Congress will be key here. If the president and Congress can agree on refinements to the ACA, Dodd-Frank law, and perhaps some tax changes, the chances for a productive 114th Congress increase.

Challenges for the GOP leadership loom large however, especially in the House. Hopefully, a two-day bicameral retreat can help them prepare for a productive 114th Congress.

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