Omnibus Situation (Dec. 14)

Mike & Co. —

Congressional negotiators appear near a bipartisan deal on a year-end spending and tax package tonight that would increase domestic and military funding, lift the ban on crude oil exports and extend several tax breaks for businesses and individuals.

 The omnibus negotiations have been going on around the clock almost without pause since Friday but every passing hour makes it less likely that an agreement can be reached in time for the Wednesday midnight deadline Congress has given itself to enact a budget for FY 2016.  

 The difficulty of the omnibus talks may result in a more modest final package.  The tax extenders piece may be severed from the omnibus, left to sink or swim on its own.  And the length of the extensions themselves may be cut back in many cases from permanent to five years or from five to two years to broaden support.   

 Meanwhile, the markets are bracing themselves for the now universally expected  increase in interest rates at the FOMC meetings this week.   Closer to home, the date of adjournment on the Hill is still unknown 11 days before Christmas.

Below is a drill-down on the budget discussions, the main stumbling blocks, and the most likely outcomes.

Dana

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You missed nothing if you heard nothing over weekend.  So, to rehash the certainties at this point in the budget and tax discussions:

  • Total discretionary spending under the budget ultimately released and adopted will cost $1.1 trillion — the proposed spending figures are not in dispute.
  • There are dozens of policy riders that lawmakers from both sides are working through.
  • Talks are “notably fluid” and remarkably secretive — nobody quite knows what the final product will look like or when it will be released.
  • The Democrats appear ready to give in on lifting the crude oil export ban if Republicans respond with their own concessions.

If a deal cannot be reached and the Senate’s procedural hurdles overcome before Wednesday’s deadline — even if the legislation is introduced as early as tomorrow — it could force Congress to pass a second short-term funding extension.  Speaker Ryan has pledged he’ll abide by the GOP’s three-day rule to give lawmakers enough time to read the massive bill.  And if the bill isn’t introduced until tomorrow, the House vote will be delayed to Thursday, forcing Congress to pass yet another short-term funding extension.

The holdup is the omnibus riders, which span a range of issues, from Wall Street reform and environmental policy to labor regulations and a Republican bill to halt the Syrian refugee program and to ensure tougher screenings.

The protracted omnibus negotiations have forced a decoupling of that bill from the similarly unfinished tax extenders package.  Unifying the parallel discussions of the bills last week slowed progress on both of them.

It is now a parallel battle over a separate legislative package extending a long list of tax breaks for both businesses and families.  After a series of short-term extensions, many in both parties want to make many of those permanent.  But House Democrats say the package has grown unwieldy and tilts too heavily in favor of corporations at the expense of individuals and federal revenues.

This despite the fact there is general agreement on the basics of the tax bill.  Parts of the Earned Income Tax Credit, Child Tax Credit and American Opportunity Tax Credit that are set to expire at the end of 2017 would be permanently extended.  So would a popular credit for corporate research programs, expanded investment write-offs for small businesses and a deduction for state and local sales taxes, along with some other smaller provisions.  The rest of the 50-odd extenders would be revived for either two or five years, though which tax breaks would get a shorter or longer life is still to be determined.

The Democrats’ push to index the child tax credit to inflation, at a cost of more than $70 billion, had been turned away by the GOP leadership.

And the Democrats appear ready to accept a major policy change by allowing an end to the current ban on crude oil exports, long sought by the petroleum industry and the GOP.   The language lifting the 40-year ban on crude oil exports could still end up either in the omnibus or the extender package.  But the Democrats’ compromise won’t come without concessions, still to be determined.  Some Democrats want extensions of renewable energy tax breaks in exchange for loosening a ban on oil exports.

Sen. Durbin said Thursday he thought it would be reasonable to expand the renewable credits or scale back breaks that oil producers get already if the export ban is lifted.  “There is strong feeling that something that’s worth up to $200 billion to the oil industry ought to be of some value to the rest of America too.”

Those leading the talks have appeared relaxed as they head to the finish line. Ryan and his kids, for instance, were spotted at Lambeau Field on Sunday for the Green Bay Packers-Dallas game.

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