If anything else, you have to give Texas Senator Ted Cruz credit for stamina and good theater. By the time we will be getting this report out, he will have wrapped up his filibuster-like marathon on the Senate floor, railing since midafternoon yesterday in a grave soliloquy against the Affordable Care Act, quoting from the Bible, comparing his stand to those who stood up to Hitler or fought for the American Revolution, telling of his dad’s green eggs and ham, and reading bedtime stories to his kids.
But for all the fun of Cruz’s long-winded theater, helped with questions from fellow Tea Party compatriots like Senator Mike Lee of Utah, what even Republicans are dubbing as the “crazy Cruz and lunatic Lee show” is not in fact a formal filibuster and means nothing other than political theater and fodder for daytime talk radio since no bill has been introduced yet to be filibustered.
*** But that changed within the hour, after the Senate voted 100-0 to utterly ignore Cruz in favor of Senate Majority Leader Harry Reid’s motion to proceed on the Senate Continuing Resolution to amend H.JR. 59 passed in the House last week. After a few procedural steps to override the sideshow filibuster threats by the Tea Party Senators — with the tacit, yawning support of the Senate Republican minority leadership — the Senate CR is highly likely to be passed by Sunday and will include the amendments stripping out the House defunding Obamacare language as well as striking out the House-passed provisions requiring the Treasury to prioritize interest payments if the debt ceiling is not increased before December 15. ***
*** We still believe as we wrote last week (SGH 9/20/13, “US Fiscal: Tea Party Shutdown Unlikely”) that the Senate CR will likewise be passed in the House in time to avoid a shutdown — although the possibility of a shortened Senate CR to November 15 from the December 15 end date of the House CR is potentially risky as it complicates the prospects for achieving final action in both chambers by the deadline of Monday midnight. And our confidence the shutdown can be avoided is only because the CR has become so intertwined with an even tougher, next in line, debt ceiling bill being drafted in the House Ways and Means Committee that House Tea Party dissidents will be kept in line this coming Monday. ***
*** But that source of confidence on the CR is also exactly why we remain much more concerned over the fate of the debt ceiling battle that will occupy most of October. Both sides see their political objectives being achieved only by pushing the debt issue to the very brink in a spectacular game of high stakes “chicken.” And as the end of October drop dead date nears for increasing the federal debt ceiling those higher risks will become more apparent as will the market volatility. ***
*** More to that same point, we also worry that this fiscal uncertainty — even in a base case scenario of no shutdown and no missed Treasury payment — will invariably feed into the market’s already rising anxieties and doubts over the Federal Reserve’s forward policy guidance and near term policy path. The Fed may be anxiously fearing the impact of “further fiscal retrenchment” on the outlook, but on Capitol Hill, neither the market nor the economy are even on the list of priorities. ***
First Up, the CR
The next few days in the Senate will be taken up with carefully mapped out procedural steps, starting with this afternoon’s motion to proceed, followed by up to 30 hours of debate until late Thursday when a vote to go forward with the motion will pass. At the same time, Reid will set up the next vote to block the filibuster attempt by Cruz and his Tea Party allies, culminating with a cloture vote some time on Saturday that with a likely 60 vote majority will close the filibuster threat and open the floor to the final debate and vote on the actual CR, including Reid’s amendments, to be passed sometime late Sunday.
That will leave less than 30 hours for the bill to be taken up and passed in the House to avoid a government shutdown. With so very little time to introduce new House amendments to then ping pong the CR back to the Senate before the midnight Monday deadline, the obvious preferred response of House Speaker John Boehner will be to bring the Senate CR quickly to the House floor. It would probably pass with a Republican 217 vote majority, or perhaps with a handful of crossover Democratic votes.
The odds of just such a quick House passage of the Senate CR were heightened when Majority Leader Reid affirmed the Senate CR would abide by the same $986.3 billion spending level of the House CR despite the howls of protests by many Senate Democrats. They were pressing to lever up the spending level to make a case for maintaining the pace of spending beyond the CR end date rather than sharply cutting it back for the remainder of the fiscal year after the CR expires to abide by the mandated $967 billion spending level required under the Budget Control Act of 2011, and sequestered to boot in the aftermath of the failed Super Committee negotiations.
But Reid calculated the spending level for a few months was worth less to him politically than the effect a relatively “clean” CR would have on both procedural and political fronts. In procedural terms, the clean CR would reduce the sheer complexity of the subsequent chess moves at such an early round of the fiscal battle, already at risk of being overwhelmed with so many moving parts. Politically, it would help to isolate Cruz and his allies, and by singling out the main political issue of Obamacare, it would help to paint the GOP as “extremist.”
Above all, on Speaker Boehner, in being forced to rely solely on House Republican votes only to pass the CR, as the House Democrats would then be politically free to whip against the CR that is too low in spending as they see it. If Boehner falls short of the bare House majority minimum of 217 Republicans, it would still be a win for the Democrats because a shutdown would be blamed on the GOP anyway for having created the entire mess in the first place.
While Speaker Boehner has told his colleagues that they must round up the needed 217 Republican votes, we remain cautious about whether the House can indeed pass the CR quickly.
Or at least that was our base case scenario until last night when Reid introduced an amendment to shorten the time of the CR to November 15.
A month seems like little, and Reid’s amendment was meant to placate Senate Appropriators miffed over the spending level. A shorter CR, they argue, will make it easier to pull together a giant Omnibus Bill incorporating all eleven FY2014 spending bills before the Thanksgiving to Christmas holiday calendar. More to the point, the Democrats are convinced, and we are not sure why, that the shorter CR will increase their leverage to lift the sequester and even increase the level of federal spending from the lower $986.3 billion CR back towards the $1.058 trillion spending level of the Senate Budget Resolution passed last spring.
It does not necessarily mean Reid will include the shorter end-date in the final version of the CR, and it could prove to have been a head fake to flush out Boehner’s strategy in how to deal with the Senate CR when it is ping-ponged back to the House by Monday morning. But if Reid does proceed with the shortened CR, he will be altering the likely dynamics in the House, probably for the worse. For instance, the House could now more easily kick back amendments to the Senate CR that shortens the CR by even more in a tit for tat move that would essentially bundle the CR rollover right into the middle of the legislative battles over the debt ceiling.
And more on that point, Boehner and the House Republican leadership have also held in reserve a final draft of the debt ceiling legislation being written by David Camp, a Boehner ally and the chairman of the House Ways and Means Committee. They did so in part for just this reason, as leverage in dealing with how to influence Reid’s tactical approach and to soften up any potential House rank and file resistance on Monday to whatever tactic Boehner adopts push the Senate CR through on the must-pass CR to avoid a Republican-blamed shutdown.
The Debt Ceiling Bill
Essentially, whatever it takes to ensure 217 Republican votes when the debt ceiling bill is brought to the House floor will be added in amendments to the final version of the debt authorization bill.
The House returns on Wednesday but the first key meeting will be the leadership huddle with the GOP conference Thursday morning to weigh their options and begin looking into what it will take to ensure the final version of the bill authorizing an increase in the federal debt ceiling passes with that minimum of 217 Republican votes out of the 233 Republicans, the so-called “majority of the majority.” For now, we are told there are some five or six different bills on the debt ceiling, and no more than six or eight Republicans so far have even seen them.
Although it is commonly assumed the bill will extend the debt ceiling for one year, we understand that it is in fact still entirely undecided.
The debt ceiling could be lifted for three months, six months, a week or it could still be for one year; it is also likely to include every last bit of Republican-prized legislative ambitions, from neutering the EPA to mandating the approval of the Keystone XL OIL pipeline project, or include maybe some defense spending protected from the sequester, all built around the centerpiece of delaying the discretionary funding to implement The Affordable Care Act for the same length of time as the debt ceiling is extended. Importantly, unlike an appropriations bill, these other non-debt limit provisions can out-last the period of the time the debt limit is raised.
Essentially then, the mathematics at play here is “addition” — whatever it takes” to ensure 217 Republican votes when the debt ceiling bill is brought to the House floor — that will determine what gets into the final version of the debt authorization bill. And in theory, Boehner could unveil the debt ceiling bill as early as Friday, though again, perhaps not, choosing to keep his cards close to his chest until the last possible tactical moment.
At least for now, we are assuming a base case that the CR is indeed passed, perhaps a few minutes to midnight Monday in some form, any form, it doesn’t really matter as long as it is passed, since the seriously heavy lifting to that longed for “final deal” on the budget and the sequester will still loom on the near horizon in a few months. In other words, the fiscal wars will drag out through at least the end of this year, so get used to it.
But stayed tuned, the outcome is in fact anything but certain. And, of course, after the CR, there is still the even larger, higher stakes battle over the debt ceiling.
Bending a “No Negotiation” Vow
The next phase in the first few weeks of October after Boehner unveils the final version of the debt ceiling plan will be in the hands of Senate Majority Leader Reid to decide whether, when, and how to gracefully back away from the President’s no negotiation vow.
That is to say, while the President seems sincere in his vow, and even though there are extremely good policy reasons not to ever negotiate over the debt ceiling for political ends, the very vow of no negotiations is in fact the start to the negotiations that will dominate the Washington coverage for most of October. That is certainly how Boehner and the Republican leadership are seeing it in any case.
For the Republicans, their strategy is to hopefully neutralize the Tea Party obstructionism and utter lack of legislative experience within their ranks going forward, but in the meantime to use it to still achieve a minimum of the political and fiscal policy objectives the GOP has sought since taking the House in 2010.
To do that, even if Boehner is determined to steer clear of any accident or debacle over missed debt repayments by Treasury, that can only be achieved by convincing the other side he is willing to push this to the edge, and for Reid, the same sort of high stakes chicken at the cliff’s edge applies.
Ironically, President Obama’s vow not to negotiate over the debt ceiling notwithstanding, his direct involvement is in fact not really necessary and in theory would only complicate a possible and even likely compromise that could be fashioned through something looking an awful lot like a regular order process to reconcile the House and Senate debt ceiling bills – albeit at what will have to be a very accelerated pace before an assumed near end of October drop dead date for the debt ceiling to be passed.
We do think a debt ceiling accident or default will be avoided, but there will be frightening headlines throughout the month as the drop dead date is assumed to be nearing. Treasury Secretary Jack Lew is warning that drop dead date is earlier than the late in the month being anticipated, but his sway on the Hill is extremely limited with the Republicans, and that is putting it politely.
And if the market starts to trade off, badly, that could always change the political dynamics, perhaps accelerating to the eventual outcome, but not the way the debt ceiling will be played out