US Fiscal: Convergence, But Deal before Weekend Unlikely

Published on October 15, 2013

No small amount of optimism dominated the headlines this morning after Senate Majority Leader Harry Reid took to the wires last night to reassure that he and Senate Minority Leader Mitch McConnell are “nearly there” in a deal to end the partial government shutdown and to lift the debt ceiling.

Reid, however, was mostly massaging the media to add pressure to McConnell to quickly accept the terms of an agreement and, in turn, to maximize the pressure on House Speaker John Boehner to bend and move the Senate bill to House vote and pass it with mostly Democratic votes.

*** That House Speaker John Boehner and the House Republican leadership are now moving forward with their own combined Continuing Resolution and debt ceiling bill indicates that a deal to end the partial government shutdown and lift the federal debt ceiling is still several “ping-pongs” between the Senate and House away; that, in turn, means it is more likely than not to take through the weekend at least to finalize a deal, and probably with some disconcerting headlines along the way since the negotiations are certain to drag out past the October 17 preliminary deadline to avoid potential mishaps or missed Treasury payments. ***

*** A quick up or down vote in the House on a Senate bill may have been seen as the fastest path to ending the crisis, but it was and remains the least likely. There are instead likely to be two bills moving in parallel at the same time through this week in the Senate and the House. And indeed, with the House potentially moving more quickly than the Senate with its own combined bills, Reid could be stalled on the Senate bill and be forced to wait for the House bill to be passed, to then take it up with Senate amendments. ***

*** That said, we do still believe a deal to end the current crisis is at least on the near horizon as both the Senate Democrats and the House Republicans are converging towards the core three parts to an agreement laid out in the initial terms negotiated between Reid and McConnell: funding the government through January 15 at the $986.3 billion discretionary spending level, extending the debt limit to at least February 7, and a budget conference committee to make longer term budget recommendations (i.e., dealing with the sequester) by December 13. ***

*** The three key dates to the current framework are in fact cleverly structured. The need to extend the debt ceiling again is placed after the vote to either extend the CR or to pass the necessary FY2014 spending bills, making another threat to the debt ceiling unlikely since neither side will want to endure another politically costly shutdown of the government. But at the same time, the debt ceiling is at least kept on the horizon to add some pressure. And likewise, the budget conference committee will be under similar pressure to cut a deal on the sequester, jettisoning it or parts of it in return for entitlement reforms or new tax revenues, or a little of both, in order to avoid that politically costly shutdown after the turn of the year. ***

*** Most of the battles over the next few days are going to be waged over the various amendments and add-ons each side wants to win votes and to position the respective parties in the aftermath of the crisis. Those amendments, which may or may not survive, be it the favorable Obamacare terms for the labor unions, the medical device tax, or the so-called Vitter amendment nixing the favorable health insurance premiums for Capitol Hill staffers, are all important issues to the two parties and may be needed to win the necessary votes. But the two clauses that matter to just about everyone else, giving federal agencies flexibility to manage the across-the-board sequester spending cuts in 2014, and especially the Treasury’s ability to continue using its extraordinary measures to extend the debt-limit deadline, are both likely to survive. ***

The Process over the next Few Days

Both Reid and McConnell are still running through the terms of an agreement with their respective caucuses this morning. McConnell could still reject the terms now to lend cover and time for Boehner to move a House bill much more to the Republican liking. If Reid is able to cobble together a Senate bill, he will revise S1569 — his prior 14 month debt ceiling extension bill — with the new language to use it as the legislative vehicle for a Senate bill to end the shutdown and lift the debt ceiling.

Meanwhile Speaker Boehner and the House Republican leadership are meeting with their conference members to weigh their options in how to write and move forward with their own combined CR and debt ceiling bill. Crucially, the House looks likely to embrace with the same dates and three part structure to the Senate bill.

And ironically, the Senate movement is what enabled Boehner to win over enough of the Tea Party dissidents to make it possible for the House to finally move its much delayed combined bills. The House may now in fact be able to pass its bills before the Senate does, raising the possibility the Senate will end up waiting for the House bills to then amend and vote on before the crisis can be brought to an end.

The Senate Republicans are certainly more anxious to get a bill passed to end the crisis, but McConnell has been consulting with Boehner who is passing on “grave” House Republican concerns that a bill so tilted to Democratic demands would be a problem in the House. So there are likely to be more tweaks to any Senate bill, even if Reid manages to write the language and files a motion to proceed by tonight.

And Senate passage of the bill in any case could take until Friday. To accelerate the bill to a vote, Reid will have to win unanimous consent to waive the 30 hours of debate rule before filing a cloture vote to blunt any filibuster threat. And then the same waiver by unanimous consent of the 30 hour rule for debate must again precede the cloture vote to end debate on the final bill, and yet again before the final vote. Any one Senator or group of Senators can take to the floor to refuse the waiver, dragging out the Senate vote.

On the House side, Boehner is still assessing the mood of his conference to determine what he will need to add into a combined CR and debt ceiling bill to pass them with Republican-only votes. To do so, Boehner will need to narrow down what the House GOP conference will want to two or three must have “asks” in order to have a reasonable chance to get to 217 Republican-only votes, all the while blunting a House Democratic minority effort to offer up the Senate bill as a motion to recommit on whatever the Republican majority puts up to a vote

Pushing a Republican-only bill through the Rules Committee, waiving the three day rule and putting it to a floor vote putting it to a floor vote could come quickly, as soon as tonight with the Rules, and a floor vote by tomorrow or Thursday the very latest.

And passing a House bill in parallel to a Senate bill, or passing it before a possibly stalled Senate bill would greatly re-establish some Republican negotiating leverage as the two bills would then need to be reconciled in conference, and that would probably take through at least the weekend.

Even if Boehner backs away from pushing through a House bill through a floor vote for fear of coming up short again on the votes, he is still all but certain to amend the Senate bill before letting it go to the House floor for a vote and then sending it back to the Senate.

In other words, there are still multiple twists and turns an end to the shutdown and lifting the debt ceiling could still take.

And so while an agreement still seems likely — eventually — to end the crisis and to push the battle over the sequester to the next showdown after the turn of the year and the holiday spending season, the chances of at least one or more “ping-pongs” of the legislation between the Senate to the House and back to the Senate seems very likely. And the headlines could get a little nasty again at times along the way.

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