Congress Returns With Daunting To-Do List by Elizabeth Varley, Columbia Threadneedle Investments
- Preventing a government shutdown will be a key priority as Congress reconvenes. Opportunities to forge ahead on new policy will be limited as fiscal challenges continue to demand attention.
- A long-term highway funding bill may fall off the to-do list while the potential for international tax reform continues to wane as 2016 presidential politics intervenes.
- The Iran treaty and the papal visit are getting attention now, but the scheduled visit with Chinese leadership should provide a helpful push for cyber-security legislation.
Congress has returned to Washington from their summer recess and they face a daunting list of to-dos. An already difficult environment for legislating, the September calendar provides limited opportunity to advance priorities with only ten legislative days scheduled. Initially, the focus will be on resolutions to disapprove of the joint nation treaty with Iran – a vote must take place by September 17. At this point, it appears that the United States will be a party to the treaty as Democratic defections are moderate. Elected officials will also be sidelined from legislative work to observe religious holidays as well as participate in the first papal address to Congress on September 24.
With minimal time to operate in September, Congressional leaders are hoping to finalize a short-term continuing resolution (CR) to avoid a government shutdown when the current fiscal year ends on September 30. There are likely to be some intense discussions over policy riders aimed at Planned Parenthood and a variety of other hot-button issues with presidential election maneuvering playing a role in the outcome. A second Republican primary debate takes place on September 16, which will involve a lot of posturing on the potential shutdown. A number of ideas are in the mix to avoid tying Planned Parenthood funding to the CR, including resurrecting reconciliation as a fallback vehicle. Reconciliation only requires a majority vote in the Senate which could be an attractive alternative.
One leftover item from the summer – a long-term highway funding bill – may fall off the fall agenda as funding looks to be available into the 2016 timeframe. Authorization for the highway trust fund will still be needed in October, however. Striking a deal to avoid the full impact of sequestration on defense and non-defense spending in the remaining months of 2015 will be a significant focus. Also on the table is the renewal of the Export-Import Bank charter which expired at the end of May. Speculation is the Export-Import Bank could catch a ride on the highway funding reauthorization bill and the administration has indicated that renewing the Bank’s charter should be on the list of items in a CR. Debt ceiling is also going to be a factor in these discussions, with current predictions pointing to the need for an increase at some point in November or early December.
Such an agreement would require some additional revenue. The types of large offsets that would be needed to pay for wish list items like a six-year highway bill or mitigate the potential impact of sequestration may prove insurmountable. The Senate-passed highway bill included offsets providing for three years of funding, about $45 billion. Some of the revenue options being discussed include lifting the export ban on crude oil, a proposal that the president has not threatened to veto, and some changes to tax policy that provide relief for U.S. based multi-nationals who are in favor of lowering corporate rates. Repatriation of foreign income is certainly in the mix but other proposals have also been floated, including a European-inspired patent box, and additional changes around tax compliance to protect against the cyber attacks that have been perpetrated against the IRS.
Tax extenders are also in need of an attention. As in 2014, the tax-writing committees want to push for making permanent at least some of these perennial extender provisions. However, given the potential for multiple CRs, the odds of any action on permanence are low, meaning that advisors and clients will be waiting until late in the year to see how extenders will be handled.
At the end of the day, congressional Democrats may be content with a series of continuing resolutions rather than a long-term deal because the Republicans would have fewer accomplishments to highlight. On the other hand, Republicans are not eager to move too far toward tax reform since many favor a tax reform push after the 2016 presidential election cycle in the hope that the environment for tax reform will improve.
Aside from the fiscal dynamics facing Congress in the fall, Chinese President Xi Jinping’s visit later this month could be leveraged to further the progress of cyber-security legislation which is now pending in the Senate. With so much focus on cyber-attacks in the private sector and government sectors, there is a shared feeling that now is the time to get at least this to-do checked off the list.