NUMBER OF THE WEEK: $203 billion

The amount of mandatory savings and reforms called for in the House FY2018 budget resolution. The House budget sets overall discretionary spending at $1.1 trillion for fiscal year 2018 and seeks to balance the budget within 10 years through a combination of spending cuts and projected economic growth.

The House Budget Committee approved the blueprint in a party-line vote of 22 to 14. However, the budget resolution is unlikely to receive floor consideration before lawmakers depart for August recess, as House Republicans have yet to unite behind the proposal. House Republican moderates are unhappy with the steep spending cuts proposed in the budget, while members of the House Freedom Caucus want to see an outline for tax reform before they vote on the measure. Fully aware of the division, House Ways and Means Chairman Kevin Brady (R-TX) reminded his colleagues of what’s at stake saying, “No budget is perfect, but for us to deliver on our promise on bold tax reform, this budget needs to move forward.”

The House budget blueprint may have stalled at the moment, but the chamber is moving to consider a “minibus” spending package this week. The bill, H.R. 3219, contains four House appropriations measures for FY2018: (1) Defense, (2) Legislative Branch, (3) Energy-Water, and (4) Milcon-VA. The fate of the other eight annual appropriations bills approved by the House Appropriation Committee is still up in the air. The current fiscal year ends on Sept. 30, but Republicans have yet to articulate a clear strategy to avoid a government shutdown in the fall.

LEGISLATIVE LANDSCAPE

Third Time’s the Charm? After two postponed votes, Senate Majority Leader Mitch McConnell (R-KY) will hold a vote on the motion to proceed to the House-passed healthcare bill this afternoon after the GOP caucus meeting. The vote is nail-bitingly close. While Sen. Susan Collins (R-ME) has indicated that she will likely vote “no,” others like Sens. Lisa Murkowski (R-AK), Dean Heller (R-NV), and Shelley Moore Capito (R-WV) remain undecided. Leadership hopes to sway holdouts during the caucus meeting.

All Eyez on Mitch. If the motion to proceed is successful, the Senate will begin 20 hours of debate on a healthcare bill. Which healthcare bill? Good question, no one knows at this writing except for McConnell. Reports indicate that McConnell will likely offer a substitute amendment to replace the text of the House-passed bill with the Senate’s updated version of H.R. 3762, the 2015 straight-repeal bill. During the debate, senators may offer various amendments to the bill. Once all other amendments have been considered, McConnell may offer a Manager’s Amendment (wraparound amendment) for a vote. This will likely be some version of a repeal-and-replace bill.

During this process, senators will also raise points of order to strip out various provisions that don’t conform to the reconciliation rules. After the conclusion of the marathon voting session, McConnell may then move to vote on the underlying bill, as amended. Republican leaders will whip votes to win over holdouts on the healthcare bill.

The Monty Hall Problem. The vote today could lead to several results. The chart below illustrates the different ways the healthcare debate may play out …

You Get a Goat! If the motion to proceed fails, the GOP may attempt …

You Get a Car (Maybe)! If the motion to proceed succeeds, then the GOP will try to …

Killing Me Softly. If McConnell’s life is not already complicated enough, earlier this week, the Senate parliamentarian, Elizabeth MacDonough, ruled that key provisions of the repeal-and-replace bill are subject to a 60-vote Byrd Rule point of order. Key “Byrd-able” provisions include:

  1. the six-month lock out to stabilize the individual market;
  2. abortion restrictions for the tax credits and defunding Planned Parenthood; and
  3. funding for the cost-sharing subsidies.

Several additional provisions are still under review, including:

  1. waivers for state innovations that allows states to waive age rating, essential health benefits, and pre-existing condition requirements so long as their proposal does not increase the federal deficit;
  2. changing the age-rating band from 3:1 to 5:1; and
  3. the flexible block grant option for states.

A full list of these provisions that Senate Democrats have compiled can be found here.

Reconciliation Party . The House FY2018 budget resolution unveiled last week contains reconciliation instructions for 11 committees to produce $203 billion in savings and reforms. The House Ways and Means Committee has been instructed to produce at least $52 billion in savings, which it plans to do via deficit-neutral tax reform. Aside from affirming that tax reform will be deficit-neutral, the budget blueprint contains no new details on tax reform. Interestingly though, the budget resolution bucks the House GOP tax reform blueprint’s use of …

Welcome Back, Kautter. The Senate Finance Committee unanimously approved the nomination of David Kautter to be the assistant secretary of tax policy at Treasury despite Ranking Member Ron Wyden’s (D-OR) concerns with Kautter’s work at Ernst and Young. The Senate is hoping to confirm Kautter before the start of August recess.

At his July 18 confirmation hearing, Kautter said he would work with the tax-writing in a “bipartisan, collaborative, and collegial manner.” On the subject of interest deductibility, Kautter said that all options are on the table, adding that he does not think there should be an “across the table” change for the deductibility of interest expense because different industries rely on debt financing and interest expensing in different ways.

REGULATORY WORLD

2017 Unified Agenda. On July 20, the Trump Administration released its 2017 Unified Agenda for Regulatory and Deregulatory Actions (“Unified Agenda”) — a semiannual report on actions that the regulatory agencies plan to issue in the near and long term. The purpose of this report is to give the public a better sense of each agency’s regulatory focus for the next 12 months. The Internal Revenue Service has outlined a total of 238 pending regulatory items but did not provide much detail on what the agency plans to do with them. Below is a list of the items that may be …

LINE ITEMS

  1. Vic Fleischer, co-chief tax counsel, for Senate Finance Committee Democrats will be stepping down from his post at the end of July. No explanation has been given for Fleischer’s departure, which leaves Tiffany Smith as the sole chief tax counsel on the Democratic side.
  2. The House will take up a disapproving resolution under the Congressional Review Act this week to nullify the arbitration rule recently finalized by the Consumer Financial Protection Bureau.
  3. Rep. Mark Meadows (R-NC), chair of the ultra-conservative House Freedom Caucus, would like to eliminate the Congressional Budget Office’s Budget Analysis Division — the unit that is responsible for scoring legislation. Meadows offered an amendment to the House’s “minibus” spending package (H.R. 3219) that would cut $15 million from the CBO to eliminate its scoring function and require the nonpartisan budget office to rely on scoring data from various think tanks instead.

IN THE QUEUE

Congressional Activity

Tuesday, 7/25

House Judiciary Committee

Subcommittee hearing on H.R. 2887, a bill to regulate certain state impositions on interstate commerce (i.e. internet sales tax)

House Ways and Means Committee

Oversight subcommittee hearing on the Treasury Inspector General for Tax Administration’s audit of the IRS’s electronic record retention policies.

Senate Banking Committee

Executive session to vote on the following nominations:

  • Mr. J. Paul Compton, Jr. to be General Counsel, HUD
  • Ms. Anna M. Farias to be Assistant Secretary for Fair Housing and Equal Opportunity, HUD
  • Mr. Neal J. Rackleff to be Assistant Secretary for Community Planning and Development, HUD
  • Mr. Richard Ashooh to be Assistant Secretary for Export Administration, Department of Commerce
  • Ms. Elizabeth Erin Walsh to be Assistant Secretary for Global Markets and Director General of the United States and Foreign Commercial Service, Department of Commerce
  • Mr. Christopher Campbell to be Assistant Secretary for Financial Institutions, Department of the Treasury.

Wednesday, 7/26

Senate Appropriations Committee

Subcommittee hearing on the Treasury’s budget with Treasury Secretary Steven Mnuchin testifying.

Thursday, 7/27

House Agriculture Committee

Nominations hearing on Rostin Behman, Brian Quintenz, and Dawn DeBerry Stump – nominees to the CFTC.

House Financial Services Committee

Annual testimony of the secretary of the Treasury on the state of the international financial system.

Senate Banking Committee

Nomination hearing for the following:

  • Joseph Otting to be Comptroller of the Currency
  • Randal Quarles to be Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System.

Agency Activity

Tuesday, 7/25

Federal Reserve

The Federal Open Market Committee holds a closed meeting, beginning at 9 a.m. The FOMC is the policymaking arm of the Federal Reserve, July 25-26.

Wednesday, 7/26

Internal Revenue Service

Open meeting of the Taxpayer Advocacy Panel Joint Committee – the Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service.

Thursday, 7/27

Internal Revenue Service

IRS hosts an industry day event designed to increase transparency about IRS strategic priorities and goals and build collaborative partnerships with industry

Friday, 7/28

Financial Stability Oversight Council

FSOC will hold a closed executive session. The preliminary agenda includes a discussion about the recommendations regarding the Volcker Rule in the Treasury Department’s June 2017 report issued pursuant to Executive Order 13772, “Core Principles for Regulating the United States Financial System”; an update on the annual reevaluation of the designation of a nonbank financial company; and a discussion regarding the pending litigation brought by MetLife against the Council.

Other Activity

Wednesday, 7/26

U.S. Chamber of Commerce

The chamber will host a special discussion with SEC Chair Jay Clayton.