REPEAT: US Budget Week: Agenda in Tatters, GOP Seeks Fall Plan

Repeats Story Initially Transmitted at 17:24 GMT Jul 28/13:24 EST Jul 28

--Republican Seven Month Quest To 'Repeal and Replace' Obamacare Implodes

--GOP Set To Shift To Budget Outline, Tax Reform

--Tsy's Mnuchin Tells Congress It Has Until End of Sept To Lift Debt Ceiling

By John Shaw

     WASHINGTON (MNI) - With their legislative agenda in shambles, the

Republican majority in Congress is now scrambling to assemble a strategy for the

autumn that funds the government for the 2018 fiscal year, increases the

statutory debt ceiling, and advances the GOP's long-cherished goal of

comprehensive tax reform.

     Republicans will not enter the fall in a strong position, given their

failed seven month quest to "repeal and replace" the Affordable Care Act. The

House passed its version of a health bill in May, but the Senate was unable to

pass any health legislation in June or July. A last ditch effort to pass a

scaled-back Republican health bill was rejected early Friday morning on a 49 to

51 vote.

     Senate Majority Leader Mitch McConnell seemed stunned by the result.

     "This is a disappointment. A disappointment indeed. Our friends over in the

House, we thank them as well. I regret that our efforts were simply not enough

this time," McConnell said early Friday.

     The House has begun its August recess and will not return to Washington

until Sept. 5, after Labor Day. The Senate is scheduled to remain in session

until mid-August. 

     The GOP leadership now must set its sights on a long list of fiscal

challenges this fall. One of the most daunting challenges facing Republicans is

how to increase the statutory debt ceiling.

     Treasury Secretary Steve Mnuchin repeated again this week his preference

for Congress to pass debt ceiling legislation before beginning its August

recess. But he added that Treasury can manage payments until the end of

September, if no legislation is passed this summer.

     The Congressional Budget Office has said the debt ceiling must be lifted by

mid-October.

     The House did pass this week a package of four of its annual spending bills

for FY 2018. The House's four-bill spending package was comprised of the

Defense, Energy-Water, Legislative Branch, and the Military Construction-VA

spending bills.

     The Senate has not passed any of its 12 spending bills for FY 2018.

     The 2018 fiscal year begins Oct. 1, 2017 and it extends until Sept. 30,

2018.  

     Under regular budget procedures, Congress should first pass an annual

budget resolution for the coming fiscal year and then write the 12 annual

spending bills. However, both House and Senate GOP leaders have begun to write

the 12 annual spending bills for FY 2018 -- before passing their budget

resolutions.

     The 12 spending bills, called Appropriations bills, allocate the

discretionary portion of the federal budget which is now slightly above $1

trillion.

     Budget law requires Congress to pass a budget resolution each year by April

15 that sets multi-year spending and revenue goals and makes budget deficit or

surplus estimates.

     There is no sanction for missing the deadline. A budget resolution is a

non-binding congressional fiscal blueprint.

     The House GOP's FY 2018 budget resolution was approved by the House Budget

Committee last week and will be considered in the fall by the full House. 

     It claims to balance the federal budget in over a decade with more than $5

trillion in deficit reduction over the decade. The House GOP budget sets FY 2018

discretionary spending at $621 billion for defense programs and $511 billion for

domestic programs.

     Senate Republicans have not introduced their FY 2018 budget resolution yet.

     The FY 2018 budget resolution is important for two reasons: First, it will

set out the discretionary spending level for FY 2018, and second, passing a

budget resolution will allow for later consideration of a budget reconciliation

bill.

     This reconciliation bill will have certain procedural protections and is

likely to be the device by which Congress hopes to consider tax reform later

this year.

     Congressional Republican leaders, joined by Treasury Secretary Steve

Mnuchin and National Economic Council Director Gary Cohn, issued Thursday a

statement outlining general principles that will guide their tax reform efforts.

     They vowed to make good on a "once in a generation" opportunity to overhaul

the tax code, adding that their package will not include the controversial

border adjustment tax.

     In addition to Mnuchin and Cohn, the statement was issued by House Speaker

Paul Ryan, Senate Majority Leader Mitch McConnell, Senate Finance Committee

Chairman Orrin Hatch, and House Ways and Means Committee Chairman Kevin Brady.

     "We are all united in the belief that the single most important action we

can take to grow our economy and help the middle class get ahead is to fix our

broken tax code for families, small business, and American job creators

competing at home and around the globe," the GOP leaders said. 

     "The goal is a plan that reduces tax rates as much as possible, allows

unprecedented capital expensing, places a priority on permanence, and creates a

system that encourages American companies to bring back jobs and profits trapped

overseas. And we are now confident that, without transitioning to a new domestic

consumption-based tax system, there is a viable approach for ensuring a level

playing field between American and foreign companies and workers, while

protecting American jobs and the U.S. tax base," they added.

     The Republican leaders said the tax overhaul package will be drafted this

fall by the House Ways and Means Committee and the Senate Finance Committee.

     "Our expectation is for this legislation to move through the committees

this fall, under regular order, followed by consideration on the House and

Senate floors," they said. 

--MNI Washington Bureau; tel: +1 202-371-2121; email: john.shaw@marketnews.com