US: A Modest 2015 Fiscal Tailwind

Published on December 8, 2014

The single most important factor driving Congress to finally pass a budget for the fiscal year that began last October is how badly they all‎ want to get out of town by Thursday. The vote on the FY2015 $1.1 trillion “Cromnibus” of 11 spending bills through the end of the fiscal year next September and a short-dated to February Continuing Resolution for the Homeland Security budget, in other words, is no longer about divisive policy issues, save for maybe the headline-grasping antics of Texas Republican Senator Ted Cruz; it is about the pragmatism of keeping an eye on the scheduled flights out of Reagan National Airport.

A few highlights of note:

*** We expect the massive Omnibus/CR FY2015 bill – it doesn’t have an HR number yet – to easily pass both the House and Senate, even if delayed at the eleventh hour. Its final total will tally up to a little less than $1.1 trillion, or around $80 to $100 billion over the top line spending total set down under the revised spending caps set two years ago, thus providing a very modest fiscal tailwind to the economy next year, which we believe will pick up in tempo in the FY2016 budget (see SGH 11/14/14, “US: Political Headwinds, Fiscal Tailwinds”). ***

*** The GOP House leadership is pressing to get the bill to a Rules Committee vote later today and to be posted by tonight. The bill is bypassing the usual Appropriation Committee votes and is instead being brought straight to floor votes, first in the House by Wednesday night, and then the Senate by unanimous consent, hopefully by Thursday night. Minority Leader Nancy Pelosi indicated she will not whip against it, meaning a hundred or more Democrats will vote for it, which in turn will free many GOP Tea Party dissidents to vote against it. That the bill was crafted by Senate Democratic Appropriations Chair Barbara Mikulski as well as GOP House Appropriations Chairman Hal Rogers with sign-off by their respective leaderships also adds to the high probabilities of reasonably smooth passage. ***

There is, however, a low probability risk of policy riders being attached that could potentially derail a smooth passage by Thursday. Among the riders being bandied about are GOP attacks on environmental regulations or prohibiting federal subsidies on insurance plans providing abortion services, and Minority Leader Mitch McConnell himself is said to be pushing a rider to end limits on coordinating spending between candidates and campaign committees; or even worse, one that would reverse the recent legalization of marijuana in the capital. As badly as those on Capitol Hill or Tea Party disciples may need just that, legal or otherwise, it seems unlikely at this point that any policy riders that do make it as attachments to the Omnibus bill will be dealbreakers.

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