US House Freedom Caucus Set To Add Conflict To Fiscal Debate

--Group of Three Dozen Conservatives Hold Balance of Power in the House

--Key Group Will Shape Spending, Debt Ceiling, Tax Reform Debates

By John Shaw

     WASHINGTON (MNI) - House Speaker Paul Ryan and Senate Majority Leader Mitch

McConnell face a very challenging autumn. They confront a backlog of daunting

fiscal issues, relatively narrow Republican majorities in their respective

chambers, virtually united Democratic opposition to their plans, and a new

president who is inexperienced, volatile, and erratic.

     Speaker Ryan has an additional problem: the House Freedom Caucus--a group

of about three dozen combative, often contentious, conservatives who seem eager

to ignore and even defy the wishes of the Speaker and other Republican leaders

on critical issues.

     As McConnell and Ryan concoct their fall strategies they must consider the

likely stance of the Freedom Caucus for a practical reason: if this group

decides to oppose high-profile Republican initiatives, they are usually able to

block them.

     Lawmakers, analysts, and pundits have still not decided how to assess the

members of the House Freedom Caucus. Some argue they are committed idealists who

deserve respect. Others believe they are implacable obstructionists who deserve

derision. But virtually everyone agrees they will be a significant force on

Capitol Hill this fall.

     "The Freedom Caucus holds the balance of power in the House. Virtually

every issue that is coming up this fall is something they care about," says Stan

Collender, a budget expert at the Qorvis MSLGROUP. "When they care about

something, they are willing to go the wall for it. They helped bring down the

last Speaker (John Boehner) and they are willing to bring down Speaker Ryan if

he departs from their agenda. And Ryan understands this," Collender adds.

     Congress returns to Washington in September with a lengthy to-do list which

includes basic measures to fund the government and pay its bills, as well as

more ambitious items such as overhauling the tax code, repealing and replacing

the Affordable Care Act, and enacting infrastructure legislation.

     The 2018 fiscal year begins October 1, 2017 and extends until September 30,

2018. None of the 12 annual spending bills for FY 2018 were approved by Congress

before it left for its August recess. These 12 spending bills allocate more than

$1 trillion in discretionary funds that keep the federal government operating.

     Additionally, the statutory debt ceiling, which is now nearly $20 trillion,

must be increased this autumn by Congress to allow the federal government to

honor its obligations and pay its bills. Treasury Secretary Steve Mnuchin sent

congressional leaders a letter on July 28 requesting that Congress pass

legislation to increase the debt ceiling by September 29. The Congressional

Budget Office has said the debt ceiling needs to be raised by mid-October to

avoid serious disruptions.

     Republicans on Capitol Hill remain deeply divided on the fall agenda,

especially in the House where rival factions jostle for ascendancy. The House

Freedom Caucus is a critical part of this unruly mix.

     A study of the Freedom Caucus by the Pew Research Center in 2015 identified

36 members in the group and more than 70% were first elected to the House in

2010 or later. On average they are younger than rest of the House GOP and many

are veterans of the Tea Party movement. They want power shifted out of

leadership to rank-and-file members. Membership to the Freedom Caucus is by

invitation and the group seeks to act as a bloc on major issues.

     According to the group's by-laws, if 80% of Freedom Caucus members agree on

an issue, the entire group will vote as a bloc on the matter. Each member is

given two exemptions per Congress. Many of the Freedom Caucus members are part

of the larger Republican Study Committee which has about 170 members who call

themselves conservatives.

     The Freedom Caucus was heartened by the election of Donald Trump as

president and by the retention of Republican majorities in Congress on November

8, 2016.

     However, the Freedom Caucus has not seen eye-to-eye with Trump and

congressional leaders on several key issues, most notably health care. They

opposed the initial House Republican bill to repeal and replace the ACA in March

of 2017, arguing that it did not go far enough and did not adequately reflect

conservative goals. Ryan was forced withdraw the bill and cobble together an

alternative which eventually passed the House. It has stalled in the Senate.

     The Freedom Caucus's opposition to the first Republican health care bill

infuriated Trump. After the bill was withdrawn, Trump hammered Democrats and the

Freedom Caucus. "The Freedom Caucus will hurt the entire Republican agenda if

they don't get on the team, & fast. We must fight them, & Dems, in 2018," he

said in a tweet.

     So what will happen this fall as Congress tries to fund the government,

raise the debt ceiling, overhaul the tax code and return to health care

legislation?

     No one knows for sure, but most analysts expect plenty of conflict.

     "The Freedom Caucus will be very important. They are more like a gang than

a coalition. They operate in a no-compromise zone. They will probably be very

disruptive this fall," says Collender, the budget expert at the Qorvis MSLGROUP.

     Phil Joyce, a fiscal policy expert at the University of Maryland, believes

the Freedom Caucus will play a large role, especially on debt ceiling

legislation. "The Freedom Caucus seems determined not to have a clean debt

ceiling. They see the debt ceiling as something to use as leverage to push their

agenda not as legislation that must be passed to protect the 'full faith and

credit' of the U.S. government," he says.

     Joyce says the Freedom Caucus will be a powerful force in Congress in the

coming months--and beyond. "As long as bipartisanship is dead, and Democrats

continue to oppose pretty much everything that Republicans do, and Republicans

have a narrow majority in the Congress, the Freedom Caucus will be very

important. They can make a huge difference," he says.

     Joyce believes the Freedom Caucus will ensure there is a contentious fall

on Capitol Hill. "Probably the best we can hope for is to limp along from one

deadline to the next. We will probably have a lot of CRs (stop-gap spending

bills) that keep the government funded."

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

[TOPICS: M$U$$$,MC$$$$,MFU$$$,MGU$$$]