GOP budget disasters....

Dueling GOP budgets head for collision in quest for tax reform

Senate Republicans released their long-awaited budget blueprint for the upcoming fiscal year, paving the way for a tax overhaul without Democratic buy-in.

By SARAH FERRIS

House and Senate Republicans stand poised to wage war over their dueling versions of a budget resolution that would unlock the GOP's long-desired tax reform.

Senate Republicans rolled out their fiscal 2018 budget on Friday, and the two chambers' choices couldn’t look more different. The House budget would require a tax plan that does not add to the deficit, while the Senate edition would allow tax writers to add $1.5 trillion to the deficit over 10 years.

One key element the two budget resolutions do share is the special power to write a tax reform bill that requires just a simple majority vote to advance in the Senate. If they fail, Republicans give up their shot at a tax overhaul without the need for Democratic support — which may mean no tax reform at all.

The high-stakes battle over that budget divergence will come to a head during the next few weeks, as both the House and Senate aim to pass their budgets and then steam toward a compromise.

Rep. Steve Womack, who is rumored to be in line as the next Budget Committee chairman, says tax reform will be the “ultimate test for leadership,” riddled with policy differences that will challenge lawmakers to consider the legislative long game. That starts with fundamental disagreements over the content of the differing budgets that would jump start the tax debate by giving a green light to the separate reconciliation process.

“There will be a myriad of reasons why people will have certain issues that they want to bring forward. To some, it will be the cuts on the mandatory side that were advanced by our ‘18 budget resolution. To others, it will be the potential adding to the deficit and the potential consequences for long-term debt,” Womack (R-Ark.) told POLITICO.

Already, it appears some of the House’s fiscal hawks will be more willing this time to cede on their fundamental demands for deficit neutrality and sizable spending cuts. The House's ambitious fiscal agenda is jam-packed with spending cuts and program overhauls.

Rep. Mark Sanford (R-S.C.), a member of the conservative House Freedom Caucus, said it’s his “sense of the conference at this point” that many fiscal conservatives will be more conciliatory than usual during budget negotiations. Republicans are under intense political pressure to begin work writing their tax reform.

What makes it easier, Sanford said, is that the budget resolution is a largely symbolic document that already falls short of the ideal many Freedom Caucus members desire. Even in the House’s conservative outline, most of the difficult cuts wouldn’t take place for several years.

“The budget is just a tattered document,” Sanford said. “At this point, it is what it is — which is maybe a vehicle for tax reform.”

Budget negotiations are even trickier in the Senate, where Majority Leader Mitch McConnell (R-Ky.) can only lose a handful of votes. Already, McConnell has had to personally intervene in tax-related disputes among members threatening to hold up the Senate’s budget.

“I’ll tell you what the budget resolution will be — whatever the Senate can pass,” Rep. Charlie Dent (R-Pa.) said last week. “A lot of people have a hard time understanding that.”

Laying out ultimatums, warns Sen. John Neely Kennedy (R-La.), will greatly impede conference negotiations on a final, bicameral product.

“I hope the House realizes what the Senate realizes — and that is the American people are very impatient with us right now,” Kennedy said. “Everybody's not gonna be happy. But I don't wanna see somebody say, ‘Well, because you didn’t do this, I’m taking my toys and going home.’”

In the House, GOP leaders have from the start tried to push the lower chamber’s budget resolution toward a final product the Senate would be more willing to accept.

Last spring, House Speaker Paul Ryan (R-Wis.) convinced House Budget Chairman Diane Black (R-Tenn.) to trim the initial goal of $500 billion in mandatory cuts to about $203 billion. And Ryan urged lawmakers during a closed-door conference meeting to remain flexible on final budget instructions and specific tax cuts.

“Don’t draw any red lines. Don’t say,‘ I’ve got to have this, I’ve got to have that,’” Rep. Tom Cole said Ryan instructed lawmakers.

Under the House budget, any tax reconciliation bill would have to include the $203 billion in mandatory cuts achieved largely by cutting safety net programs. That prompted some GOP moderates to warn of the political optics of cutting food stamps or Medicaid to pay for corporate tax breaks.

The House budget also lays out strict parameters to prevent a tax plan from adding to the deficit, even short-term. And that language has given heartburn to Budget panel members like Rep. Jim Renacci (R-Ohio), who almost voted against the resolution because he was afraid it doesn’t provide tax writers with enough funding flexibility to achieve desired cuts.

The final budget agreement, Renacci notes, will likely emerge “a little more flexible” due to Senate input.

The House’s fiscal conservatives have already conceded that they expect to lose some battles over the final budget resolution.

Rep. Mark Meadows (R-N.C.), head of the House Freedom Caucus, said he supports the Senate’s calls for adding $1.5 trillion to the deficit over 10 years because it “allows for us to be very aggressive on tax cuts." But the North Carolinian is firm on his insistence that the final product can’t simply be a “shell” for reconciliation.

For fiscal hawks like Meadows, concessions to achieve tax reform could be ugly marks on otherwise pristine records of opposing bills that don’t meet all of their deficit-reducing demands.

House Republicans will likely be forced to abandon calls for roughly $200 billion in mandatory cuts — the most ever proposed by a budget committee through reconciliation. They’ll also be expected to sign on to a budget that breaks the party’s cardinal rule: Achieving balance within 10 years.

Due to the tight time frame for tax reform, the House Budget Committee is hoping the Senate will be more likely to adopt some of the lower chamber’s ideas, “rather than finding a middle ground on every single provision,” one House GOP aide said.

“If they want to do $1.5 trillion, then maybe the compromise is they look at mandatory spending,” the aide said.

Senate budget writers have assumed offsets of their own, giving the Energy and Natural Resources Committee the task of finding at least $1 billion over a decade — projected savings expected to result from opening up oil drilling in the Arctic National Wildlife Refuge.