Congressional Negotiations Over Year-End Spending Bill Hit a Tax Snag

(The Washington Post) —

Congressional leaders are preparing for days of heavy negotiations over a year-end spending bill as lawmakers try to reach a deal before a Friday deadline and avert a government shutdown.

After days of scrambling to hammer out an agreement, negotiators are still deadlocked over several addition policies, often called “riders,” that GOP lawmakers want to attach to the must-pass legislation, as well as over what do with a package of tax breaks, known as “tax extenders.”

Key lawmakers on Monday said the length of time for extension of the tax breaks for businesses and individuals has become a particularly thorny issue, with some members worried about the cost and others complaining there are too many giveaways to corporate interests.

“We thought we had an agreement, and were moving very substantially but then complications with the tax extenders have been a bit of a setback,” said Sen. Barbara A. Mikulski, D-Md., the ranking member on the Appropriations Committee. “But we were making great progress on the money – I felt great progress on the riders. But right now we seem to be stuck.”

House Majority Leader Kevin McCarthy, R-Calif., said on Monday that he expects the House will be in session on Friday and he would not rule out the need for a stop-gap continuing resolution, or CR, to extend the current funding deadline a few days.

“I think people have to be serious and finish up negotiations,” McCarthy said. “If we are close here, putting on a short-term CR to finish it up in the next days shouldn’t be a problem.”

But with time ticking down, the White House is seeking to pressure Congress to get the bill done.

White House spokesman Joshua Earnest told reporters that President Barack Obama would not sign a short-term spending bill in order to give negotiators more time to strike a deal. If lawmakers reach an agreement before Friday, however, Earnest did not rule out the possibility of agreeing to a stop-gap bill to give Congress time to finish up routine procedures needed to get the legislation to the White House.

Aides and lawmakers said the talks over the spending and tax packages are increasingly intertwined as House and Senate leaders work to craft a deal that would allow both parties to claim some policy victories.

Sen. Charles Grassley, R-Iowa, said that at this point both the omnibus and the tax extenders package would likely have to been combined into one large bill, but that leaders would have to make that call.

“I would expect at this late stage that’s the only way you get both of ’em done,” he said.

At issue is now is how long some of the breaks should be extended.

Republicans have been pushing to make permanent several business breaks, including the credit for research and development and small business expensing, and in exchange were offering to permanently extend the Child Tax Credit and expand the Earned Income tax credit, both priorities for Democrats. Under that plan the remaining breaks would be extended for two years.

But some negotiators from both parties worry the estimated $700 billion to $800 billion price tag for a tax extender package could be too expensive for lawmakers to support. This has led to talks of moving a bill that retroactively reauthorizes all of the expired programs for one year and extends them for one year going forward.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) told reporters on Monday that he expects the House will pass a two-year bill this week and negotiators will continue to work on a broader deal.

“I think the House is going to pass a two-year just in case,” Hatch said. “But if Democrats will work with us we’ll get it done.”

House Ways and Means Committee Chairman Kevin Brady (R-Texas) said negotiations on a broader package could still happen even if the House moves on a short-term patch.

“As long as everyone stays at the table and continues to work, yes.” Brady said.

Democratic votes will likely be needed to pass the omnibus appropriations bill in the House because a group of conservatives is likely to oppose the legislation over spending levels and because it will provide money for some programs they oppose.

Democrats are using this leverage to push Republicans to get rid of some of the riders that were included in the initial offer, which they say remain an issue in the negotiations.

“In order for us to support the Omnibus bill, the poison pill riders must go,” House Minority Leader Nancy Pelosi, D-Calif., told her colleagues in a letter sent Monday afternoon.

Many Republicans, however, feel getting some of the policy provisions into the bill is key after the earlier deal to increase overall spending.

“We made it really clear that the president got what he asked for. He got his $50 billion for social spending,” Rep. Matt Salmon, R-Ariz., a member of the conservative House Freedom Caucus, said last week after leaving a GOP conference meeting. “Now it’s our turn and I don’t think it’s unreasonable.”

The list of demands from Republicans includes increasing screening for refugees from Syria and Iraq, scaling back environmental and banking regulations, and giving health care providers the right to object to providing certain services that go against their religious beliefs. Many also dislike a campaign finance provision backed by McConnell that would increase strict limits on how much national party committees can spend to coordinate with individual candidates.

Democrats said they will not budge on undermining President Obama’s executive actions on immigration. But several aides and lobbyists said they expect Democrats might be willing to accept some changes to the 2010 Dodd-Frank Wall Street reform bill.

Republicans have floated the possibility of increasing the threshold at which banks face increased scrutiny from the Federal Reserve. That may be appealing to some moderate Democrats but would almost certainly draw the ire of liberals like Sen. Elizabeth Warren, D-Mass., who was enraged when leaders eased financial regulations in a similar spending bill last year.

Campaign finance could be another area of compromise. Conservatives worry that the proposed changes would give greater electoral control to mainstream party leaders. Aides said the campaign finance rule could possibly be adapted to ease those concerns by including language that would allow the rule to apply to potential third party committees that might be created in the future.

The fate of environmental regulations remains dicey. McConnell has said for months that he plans to use the appropriations process to hammer away at Obama’s recent executive actions aimed at air and water pollution. Republicans have insisted that funding for those regulations be rolled back in the upcoming spending bill, according to aides and lobbyists.

The discussion comes at an awkward time for Obama who just returned from a global climate summit in Paris. The ongoing talks are aimed at working out a long-term international agreement to curb climate change. Scaling back regulations now could weaken U.S. negotiators by proving that Congress can move to undo any promises made by the White House.

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