The Republican-led Congress and President Trump secured their first significant legislative victory with the December passage of tax reform legislation. Following that success, the GOP passed another temporary funding bill to avert a government shutdown before adjourning for the Christmas-New Year break. As a result, congressional leaders have again put off a resolution of a major fiscal debate over the budget, along with partisan disputes over immigration, health care, and national security, among other topics. The January work period is expected to focus on these issues, while Congress aims to meet a January 19 deadline for the current stopgap funding extension. The time to strike the necessary deals will be very tight. While the Senate returns to Washington on January 3, the House announced that it would not return to Washington until the week of January 9, not the prior week, as initially planned, leaving only a week and a half to find a resolution to the number of challenging agenda items the chambers confront.

The current four-week spending bill allows Republican congressional leaders and the White House additional time to negotiate with Democrats on spending legislation to prevent a government shutdown by January 19. With Republicans focused in December on tax reform, they lacked the time to resolve the contentious spending disputes both within their own party and with the Democrats. Because spending bills may not qualify for treatment under reconciliation procedures, Senate Republicans need Democratic votes for any eventual year-long spending bill, and that need creates stark challenges for House Republicans.

Lawmakers have been working towards a potential two-year budget agreement on discretionary spending levels for the remainder of Fiscal Year (FY) 2018 and FY 2019. Such a deal is certain to increase the spending caps established by the 2011 Budget Control Act, under which Congress may only appropriate up to $549 billion for defense programs and $516 billion for non-defense programs in FY 2018, a cut from FY 2017 levels. Republican defense hawks and the Trump Administration have been aiming to boost Pentagon spending above $600 billion. In return for such an increase, Democrats have been demanding that increases in defense spending be met with a dollar-for-dollar increase in non-defense spending. So far a deal has remained elusive, but leadership on both sides have indicated the conversations are ongoing. Should a budget agreement be reached, it is highly likely that the deal to revise the 2011 Budget Control Act caps would be enacted as part of another short-term spending bill in January. If such a bill is approved, congressional appropriators will then be able to draft an omnibus spending bill for the remainder of FY 2018 reflecting the spending agreement. In such a scenario, a final spending bill would likely be considered in February.

Democrats hold significant influence in the fiscal negotiations because any eventual legislation adjusting spending caps and authorizing spending will need Democratic support, due to expected opposition from fiscal conservatives in the House and the ability of Democrats to filibuster a spending bill in the Senate. Democratic leadership can be expected to press for adding a number of their policy priorities to the current short-term funding measure, such as a resolution to the ongoing immigration debate over the Deferred Action for Childhood Arrivals (DACA) program and a measure to provide stabilization to the health insurance market. Democrats had initially pushed to include both items in the December continuing resolution but ultimately decided to keep the stopgap bill free from riders. Given the adverse reaction reported in the media to the Democrats’ failure to insist on a resolution of at least the DACA issue in December, it is likely Democrats will draw firmer lines in January and utilize their leverage over these issues during negotiations.

In the interim, Republican Senate leadership and the White House have committed to bringing DACA fix legislation to the floor in January to protect persons who were brought to the country illegally by their parents when they were children, although the details on a bipartisan compromise remains unclear. The Trump Administration announced in September that it will end the popular DACA program in March 2018 because it lacked congressional authorization. Without congressional action by March 5, the nearly 700,000 undocumented immigrants currently enrolled in the DACA program would lose their protected status and could potentially face deportation. While congressional supporters have worked to develop a legislative fix, major divisions remain over how to authorize the program by law and whether to include border security and various enhanced immigration enforcement authorities in a DACA legislative package without alienating support from either party. Senate negotiators are reportedly still working through these details while also trying to ensure that any compromise bill for DACA authorization remains narrow in scope and does not turn into a comprehensive immigration reform proposal. Any eventual legislation negotiated in the Senate may face a difficult path in the House, as Speaker Ryan promised his conference upon assuming his leadership post in 2015 that he would only bring an immigration bill to the floor if it has the support from a majority of Republicans. Because of these challenges, supporters of a DACA fix are likely to want any legislation that is negotiated to be attached to the omnibus spending bill.

Senate Republican leaders have also agreed to bring two bills to the floor for a vote in response to the calls for a legislative effort to help stabilize the health insurance market. The first measure, sponsored by Sen. Lamar Alexander, (R-TN) and Sen. Patty Murray (D-WA), would resume the “cost-sharing reduction payments” discontinued by the Trump Administration in October. These payments reduced the out-of-pocket insurance costs for low-income individuals acquiring health insurance under the Affordable Care Act. The second measure, sponsored by Sen. Susan Collins (R-ME) and Sen. Bill Nelson (D-FL), would create a “reinsurance ” mechanism for federal funding to assist companies with backup coverage when policyholders have catastrophic medical costs. Both of these proposals will need to maintain significant Democratic support in order to be enacted, because conservative Republicans are wary of propping up the health-insurance marketplace established by the Affordable Care Act. It is likely that the measures would have to be linked to a piece of must-pass legislation, such as the omnibus spending bill, in order to ensure passage.

While DACA and health insurance market stabilization provisions were not included in the stopgap funding bill, the measure did include a short extension of expiring Foreign Intelligence Surveillance Act (FISA) authorities. Section 702 of FISA is considered by the intelligence community to be a pillar of U.S. counter-terrorism efforts, but many privacy and civil liberties advocates are critical of the program and have called for reforms. National security hawks and privacy advocates on Capitol Hill have been debating how to reauthorize the program, for how long to extend the surveillance authority, and what enhanced civil liberties protections can be included in a renewal. Several competing proposals have been introduced in both chambers, but lawmakers could not come to an agreement on how to provide for a long-term reauthorization of the program before its December 31 expiration date. Lawmakers instead provided for a short-term extension of the current authority in the stopgap funding bill, which will expire on January 19. Privacy advocates, including members of the House Freedom Caucus, want to see additional and significant protections put in place to protect Americans from intelligence activities. The Freedom Caucus reportedly secured a commitment from House leadership, in exchange for their votes on the stopgap funding bill, that they would be allowed to offer requested amendments to a long-term FISA reauthorization during floor debate, but it is unclear which bill will emerge as the vehicle. Members of the House Judiciary Committee advanced a bipartisan proposal that strengthens civil liberties protections and would reauthorize the program for six years, but a competing proposal from the House Intelligence Committee provides for less extensive privacy controls. Across the Capitol, Sen. Patrick Leahy (D-VT) and Sen. Mike Lee (R-UT) introduced a bill that places additional restrictions on intelligence activities. In October, the Senate Intelligence Committee advanced a bill that would extend Section 702 authority through 2025 and include modest reforms. Sen. Rand Paul (R-KY) and Sen. Ron Wyden (D-OR) and a bipartisan group of House lawmakers have also introduced legislation that would add more significant privacy protections under Section 702 and maintain the sunset clause requiring congressional reauthorization every four years. How these competing approaches will be sorted out and the program, a cornerstone of national security policy in an age of threats emanating from sources beyond traditional nation-state adversaries, remains uncertain.

Another program extended as part of the current continuing resolution is the flood insurance program, which the House has voted to reform but the Senate has not. The existing investor visa program, the so-called EB-5 program (named for the codified provision of the Immigration and Nationality Act at which it is found), has been renewed through appropriations bills for some time now. Negotiations between program supporters and those who want to reform the program have been ongoing for some time. Program supporters are likely aiming to resolve the matter and secure legislation soon because of the prospect that U.S. Citizenship and Immigration Services, the agency that oversees the program, will make significant regulatory changes to the program if legislation is not forthcoming.

Another issue that has previously roiled omnibus spending bills is the looming shortfall in various pension plans, especially those for coal miners. Resolution of that issue, and perhaps broader pension issues, is also likely to bedevil negotiations over spending caps and any omnibus spending bill that results from an overall spending deal.

Lurking in the background of the substantive discussions over spending is the political calculus both parties are making: if the negotiations fail, which party will be blamed for any eventual government shutdown. With control of both legislative chambers and the White House, Republicans fear they will be blamed for any shutdown, but some are suggesting that it depends on the reason why the government shuts down. Some Republicans think that if there is a deal on spending but not on DACA, they could point the finger at Democrats, and that could induce enough Democratic senators, especially from states won by President Trump, to support a spending bill and avoid a shutdown. These kinds of political calculations will be made as the January 19 deadline approaches and each party decides what is in its best political interests, as well as what is in the country’s best interests.

Aside from their work on spending caps and the omnibus spending bill dependent on resolving the larger budget issues, the Senate is also expected to take up another funding matter in January- an $81 billion disaster aid bill that passed the House in December, but stalled in the Senate. Republican Leader Mitch McConnell (R-KY) was unable to strike an agreement to speed up the floor debate on the measure before the chamber adjourned for the holidays, leaving it as another item on the to-do list for January. The bill provides disaster aid funding for communities affected by the recent hurricanes in Texas, Florida, Puerto Rico and the U.S. Virgin Islands, as well as wildfires in California. Democrats argued that the bill does not provide enough aid to Puerto Rico and the U.S. Virgin Islands, while the Texas congressional delegation is pushing for more money specifically for recovery efforts in their state. Any additional funds earmarked for Texas would likely be met with demands from other delegations, in particular Florida and California, whose communities were also hard-hit by storms or fires. Congress has already approved more than $130 billion in aid for natural disasters that occurred in 2017, and much of that money remains unspent, so there is less real-world urgency in wrapping up action on the next disaster relief bill.

During this work period lawmakers may also consider a package of tax extenders, popular tax breaks that expired at the end of 2016, but were not included in the newly-enacted tax reform legislation. In late December, Senate Finance Committee Chairman Orrin Hatch (R-UT) unveiled legislation to renew several dozen of the lapsed tax breaks through the end of 2018. House Ways and Means Committee Chairman Kevin Brady (R-TX) and other committee members have publicly stated that they are still discussing how to deal with the expired tax breaks and discussions will not begin until January at the earliest. Because the two chambers are on different timelines, it is not likely the legislation will be resolved in the coming month.

As these major policy negotiations are occurring, Congress must also consider whether to raise or suspend the debt ceiling in order for the U.S. Treasury to avoid a default. Based on current projections, the Treasury can continue to take “extraordinary measures” to cover the nation’s debts until mid-March. Many view the eventual omnibus spending package as a likely vehicle for the debt limit increase.

Finally, among the Senate’s signal achievements of the past year was the number of federal judges it confirmed. It is likely the Senate will continue to focus floor time on confirming both executive branch appointees, in particular those nominated to regulatory agencies (at which they can advance the President’s deregulatory agenda), and judicial nominees.