Overview
Two Weeks to Go: GOP leadership and top appropriators met this week to discuss the path forward for government funding given the stalled talks. By Thursday, staff were drafting a full-year continuing resolution (CR). President Trump officially endorsed this approach on Thursday, but House and Senate Appropriations Chairs Susan Collins (R-ME) and Tom Cole (R-OK) maintain that bipartisan negotiations are continuing. Importantly, Democratic votes will be needed to pass either appropriations bills or a CR giving Democrats some leverage in negotiations.
Threading the needle and passing a full-year CR will not be easy, however. Speaker Mike Johnson (R-LA) has said that the CR would be “as clean as possible” but would need to account for anomalies and current political realities, in which certain agencies and departments no longer need the same levels of funding due to DOGE cuts. Additionally, conservatives are calling for DOGE’s preliminary findings of waste within the government to be included as cuts.
Democrats are unlikely to support provisions that would be seen as endorsements of DOGE and therefore their inclusions could become an impediment to passing a CR. Democratic appropriators have said that they do not want a government shutdown but still want some form of assurance that the money Congress appropriates will be spent by the Trump administration.
Reconciling Reconciliation: Both the House and Senate have passed their separate budget resolutions. Congressional leadership from both chambers will now negotiate the two budget resolutions into a singular framework from which the authorizing committees will begin drafting their respective language. If you are interested in reading a brief overview of this process, our team published a client alert earlier this year.
As discussed in prior newsletters, substantive efforts to reduce spending would have to include cuts to mandatory programs (Medicare, Medicaid, and Social Security), and this issue has become a flash point in the House budget debate. The budget resolution tasked the House Energy and Commerce Committee with finding $880 billion in cuts, which many expect to include cuts to Medicaid. Democrats were quick to sound the alarm, but Speaker Johnson and President Trump just as quickly assured the public that there would be no cuts to Medicaid -- only cuts related to waste, fraud, and abuse in the program.
While it won’t quell hard-liners in the House, GOP leadership has also been discussing using an accounting method proposed by the Senate to bring down the cost of extending or making permanent the TCJA. The House budget includes a 10-year extension of the TCJA, which under House accounting rules would need to be offset. The Senate budget does not include tax provisions but the Senate Republican position is to make the TCJA permanent in a second bill. The Senate argument is that extending TCJA would be a continuation of current policy and could be included in the “current policy baseline.” Thus, it would not count as new spending. While this change might absolve Congress from having to make unwanted spending cuts, setting this precedent would have long-term effects on future budget debates.
