Prior to its return from the August recess, we noted that a difficult fall session awaited Congress. Elected officials would face, among other things, a potential government shutdown, expiring highway funding, an unprecedented address to a joint session of Congress by the pope, and a party challenge to the Speaker of the House of Representatives. Well, after a month, Pope Francis has come and gone, and Speaker of the House John Boehner is not far behind. In fact, what promised to be a difficult fall session legislatively has become even more complicated.
Speaker Boehner’s surprise resignation, announced the day after the pope’s address, forestalled a threat by House conservatives to shut down the government unless federal spending for Planned Parenthood was eliminated. Federal spending would have halted September 30 unless a short-term continuing resolution (“CR”) was passed by Congress and signed by President Obama, and conservatives wanted any CR that Boehner brought to the House floor for a vote to meet their conditions. Otherwise, a number of House conservatives were prepared to vote for a motion to remove Boehner as speaker.
While many thought Boehner could withstand a revolt within his own party, his resignation announcement removed any leverage his more conservative members may have had to prevent him from bringing up a “clean CR” that would garner Democratic votes, pass the Senate, and be signed by President Obama. Congress gave final approval to a stopgap, short-term funding measure on September 30, but the bill only extends funding for two months, expiring December 11.
Complicating matters even further, the Treasury Department announced that Congress would have to approve a federal debt-ceiling increase sooner than had been originally anticipated – by November 5 – or the federal government would default on its obligations. A debt-ceiling increase was expected to be part of an omnibus budget compromise, with Congress having until the end of this year to negotiate an agreement.
What can we expect?
- All of this increases the likelihood of another fiscal cliff scenario, with Republicans, Democrats, and the White House using the various deadlines as leverage to push their agendas. Conservatives will insist that the budget caps negotiated under the 2011 budget agreement (commonly referred to as the “sequester”) remain in place, and will balk at increasing the debt limit without such a commitment. Boehner’s departure on October 30 increases the difficulty for the person who would succeed him, Kevin McCarthy (R-CA), the current House Majority Leader. If he is to become the next Speaker of the House, McCarthy must first ensure he has enough votes from the very House conservatives who distrusted Boehner and House leadership.
- McCarthy is expected to win the votes needed from the Republican caucus when they vote to nominate him for Speaker, scheduled for this Thursday, October 8. However, he will need a majority of the votes of all of the House to be elected Speaker – 218 votes – when that vote is held. House Democrats will vote for their nominee (probably Nancy Pelosi) to become speaker, meaning McCarthy will have to win with 218 Republican votes. Since there are 247 Republicans in the House, McCarthy can only afford to lose 29 Republicans. Currently, there are 50 Republicans who self-identify as “tea party” or very conservative on fiscal matters. In return for their support, they could extract commitments from McCarthy regarding future budget negotiations which would decrease his flexibility in negotiations with the Senate and White House.
- Any tax legislation will come under increased scrutiny. For NAIOP, this means that tax extenders legislation containing provisions on 15-year leasehold-improvement depreciation, bonus depreciation, Section 179 expensing, New Markets Tax Credits, and other items could be in danger of being pulled into negotiations on a year-end, omnibus spending agreement. Already, some are trying to characterize these traditionally bipartisan provisions as corporate welfare that should be opposed.
- Spending on transportation and infrastructure, another NAIOP priority, is also affected. A six-year, fully-funded transportation reauthorization bill remains unlikely. While Highway Trust Fund authorization expires October 29, enough financing remains available to reach December. House and Senate tax writers have been discussing tax measures enabling U.S. corporations to repatriate profits currently held overseas, with the one-time revenue boost funding transportation. However, those efforts have been unsuccessful thus far. While a six-year highway transportation bill could conceivably make it into a “grand bargain” budget deal, it is more likely that the House settles for Senate legislation providing for three-year funding.
With members of Congress back home in their districts for a scheduled work week beginning October 11, and with the full House vote for speaker scheduled for October 29, there will be very little time for new leadership to deal with the November 5 debt limit deadline. Expect an interesting few months ahead!
Aquiles Suarez is Senior Vice President for Government Affairs at NAIOP.