The major reforms to Senate Rule XXII sought by progressives are not to be. Instead the likeliest reforms to occur on this as soon as today will be along the lines of the Levin-McCain proposal. The odds favor this bipartisan reform package and thus should be done with the 67 votes required by Senate Rule V (but not the Constitution). Majority Leader Harry Reid (D-NV) is unlikely to use the Constitutional Option (or Nuclear Option of passing a rule change with less than 67 votes, but with more than a majority).

 

The significance of this is that the Senate should be less burdened by minority obstruction of procedure. This is a good sign for future negotiations around debt ceiling, sequester and a budget, as well as Senate legislation generally.

 

Expect reforms to: limit debate on the motion to proceed (the easiest path to obstruction); allow minority amendments (the minority being able to offer amendments, or alternatively the majority being unable to fill the amendment tree in some instances), a reduction in post-cloture debate; and a streamlining of the conference process (collapsing motions to insist, request and appoint into one non-divisible motion).

 

All that said, these reforms are window dressing as they will be enacted as a Standing Order that expires at the end of the 113th Senate. As important to realize, so one does not become giddy at the prospect of legislative momentum in the Senate, is that all of these reforms are at the prerogative of the Senate Majority Leader and does not in reality change the status quo. Pragmatically Sen. Reid will be reluctant to allow Minority Leader Mitch McConnell (R-KY) to offer amendments, which in turn allows the Motion to Proceed to be debatable (and thus filibuster-able).

 

This is a very good sign in respect to the comity of the Senate and could lead to constructive deliberation. Yet there remains immense potential that the Senate falls back into the obstructionist traits that have defined it the last four years.

Without Democratic votes the House Republican Leadership's debt ceiling suspension bill, 'No Budget, No Pay' would not have passed. Of the 233 House GOPers, only 200 voted Yea, requiring 18 Democratic votes to pass this legislation. Speaker Boehner indeed got a majority of the majority, but 33 Republicans reneged, potentially leaving Republican leadership with their six hanging in the wind.

This vote speaks volumes about future budget negotiations, sequester and the next debt ceiling clash in May and how the Republican House Conference may be expected to perform if its leadership does not meet its conservative litmus test (defined by its lack of definition; they'll know it when they see it) on mandatory and discretionary spending.

Correction: 199 GOP yes votes; 86 Dem yes votes.

The House Republican Leadership’s debt ceiling suspension vote today is politically savvy but is a legislative stunt. Speaker John Boehner (R-OH) has only accomplished in furthering his obligation to the most conservative in his conference. At the slightest hint that the deal that results from this suspension does not pass the conservative litmus test there will be revolt.

 

This bill is a legislative stunt in contrast with the House GOP conference’s desire to return to regular order. This bill was not spawned from regular order; there were no committee meetings. This is a bill handed down by House Republican leadership without debate, including the unlikelihood of an open rule when the bill comes to the floor.

 

House conservatives will likely vote for this debt ceiling suspension bill today so Speaker Boehner is likely to get a majority of the majority. Approving this bill places conservatives in a position to walk away from their leadership if the legislative process works its way to a compromise with the US Senate that they find unacceptable. This was on full display yesterday when Rep. David Schweikert (R-AZ) said, “We’ll always play great with the team when we’re doing what’s conservative.” Further, this vote today will embolden House conservatives to shutdown the federal government in February.

 

As to sequester, House conservatives have realigned their line in the sand away from preserving defense spending and placed it squarely on the $974 billion in sequester spending cuts with the intent to have a balanced budget in ten years. So conservatives are ready to re-sequence spending cuts as long as the cuts equal $974 billion; this demonstrates a willingness to make defense cuts but likely would require budget cuts to mandatory spending.

 

There remain House conservatives wary of today’s debt ceiling suspension vote but on the whole conservatives see this as a vote they must take in order to apply pressure on their leadership later.

The announcement by House Minority Leader Eric Cantor (R-VA) that there will be a vote on the debt ceiling next week was not a concession. Saying, "we will authorize a three month debt limit increase to give the Senate and House time to pass a budget," is more political brinksmanship.

 

Effectively, Mr. Cantor's offer is a three month extension. The expected extension was six months (see below, January 17, 2013) to allow time for a budget agreement to develop between the House and Senate.

 

Unexpected was that House Republicans would entirely punt budgeting to Senate Democrats. Accompanying the passing of the hot potato to Democrats was the threat of a suspension of pay if a budget resolution was not attained; so clear a violation of the 27th Amendment that it was rejected out of hand by Rep. Darrell Issa (R-CA).

 

House Republicans have not given up on using the debt ceiling as a bargaining tool. They are simply trying to shift the burden from themselves to their Democratic colleagues on the other side of the Capitol (as anticipated in an earlier post this week). Further, they are doing as expected (see below, January 15, 2013) and making dissentience a way of life on Capitol Hill.

 

Mr. Cantor's statement about authorizing a debt limit increase for three months indicates he has the backing of the majority of the majority. We'll know if that is the case next week. It seems hard to believe but it may well be that the central Virginian air helped House Republican leadership get their conference in line.

 

All of this comes at an interesting moment in time in the Senate when its rules governing the use of the filibuster will be the first order of buisness after the current recess. Look for Maj. Leader Reid to shift cloture to the minority by requiring 41 votes to sustain a filibuster, making it more difficult for Minority Leader Mitch McConnell (R-KY) to drop anchor (freeze Senate business) and hold on (until after the 2014 election) when Republicans should historically add seats in both chambers and President Obama's visage will more and more resemble that of a lame duck.

 

Trade:

Pending are two trade agreements: TransPacific Partnership (see below, December 14, 2012) and the US-EU Trade Agreement. TPP involves Pacific Rim nations and is a priority to the Obama Administration as part of its pivot to Asia strategy and as the first agreement fully negotiated by this White House. TPP is controversial and will draw opposition not only from US labor and environmental groups, but from the Republican Tea Party factions. Points of contention will be the use of international tribunals to resolve disputes and China's eligibility given the structure of the agreement's membership ratification process (which could potentially also apply to North Korea).

 

The US-EU Trade Agreement is far less controversial and will not garner significant US labor opposition as European environmental and social welfare standards are more progressive than those in the U.S.

 

Trade tension with China will continue to be a flash-point, further heightened by the debate over the US debt but also including currency manipulation, WTO requirements (i.e. government procurement), tariffs, intellectual property protection, China-owned enterprises and raw material export restrictions among others.

 

This year the US likely expands its Bilateral Investment Treaties as a method to protect US investments abroad in countries where investors are vulnerable, including treaties with India and China.

 

 

 

 

 

 

The House Republican Conference is in retreat to central Virginia through the weekend to gather itself and devise a plan to move forward in the 113th Congress. Notably, Rep. Paul Ryan (R-WI) addressed the conference today stressing the significance of the debt ceiling as a negotiating tool while reminding the more precocious Members of the conference about the consequences of treating it as a casual matter.

 

The upshot from this retreat is that the intent is to devise a robust proposal that reforms entitlements (chained CPI for Social Security and Medicare eligibility age), specifies spending cuts and identifies revenue sources (closing loopholes and limiting deductions for higher income earners).

All of this cannot happen in two months. Therefore along with this proposal would be a short-term increase in the debt ceiling (six months, as three months is inadequate to expect action out of the Senate) to hammer out an agreement with the White House. House Republicans seem finally to be taking President Obama at his word that he will not negotiate under threat of default so this proposal is an attempt to find negotiating leverage using the debt ceiling without bearing responsibility for a default. However, this is the exactly the scenario the President doesn’t want and the White House will bristle at its introduction.

Within the House there is a desire to return to regular order rather than bake-n-vote deals fashioned by a handful of leaders (e.g. the Fiscal Cliff negotiation that resulted in the American Taxpayer Relief Act of 2012). Members want committee hearings and input; which really means many rank and file GOPers do not trust their leadership but also rightly want to do their jobs. Another reason for a six month repreive on the debt ceiling.

 

What the GOP House retreat yields is yet to be seen. As of now it appears Speaker Boehner (R-OH) and Minority Leader Cantor (R-VA) want to bring order to their conference after having to pass the Fiscal Cliff bill and Hurricane Sandy relief with less than a majority of the majority. Passing bills with less than a majority of the majority makes for more minority influence than would make any House Speaker comfortable. The next two months are do or die time for Speaker Boehner if he wants to retain his leadership into the second session of the 113th, which candidly is a shame but is the reality for a conservative considered to be moderate by many of his newest conference colleagues.

 

Defense:

Among the defense issues that will get notice in this new Congress will be (other than the immediate sequestration) Foreign Military Sales. The last four years the average FMS has been two and a half times what it was in the previous decade ($30 billion v. $12 billion). This growth is reflective of the Defense Department’s strategy of pivot (to Asia) and partnership (largely everywhere else). This is obviously very good for the US defense sector as FMS reached over $60 billion in 2012.

Energy:
On the Senate side expect the Committee on Energy and Natural Resources to run smoothly as Sen. Ron Wyden (R-OR) and Senator Lisa Murkowski (D-AK) have constructed a productive working relationship. If sequestration does go into effect the Department of Energy will see an eight percent budget reduction, which will trigger a fight between Republicans and Democrats over clean energy research. Watch for conflict over production and investment tax credits for the renewable energy sector.

This is a small slice of what to look for in both of these sectors; more tomorrow on these and others.

American Airlines today prevails in a labor certification election among Passenger Service Agents seeking to join the Communication Workers of America. The final vote was 3052 to 2902. AA may now continue to exact labor cost cutting measures as it proceeds through bankruptcy and an eventual merger with US Airways.

The tone for the 113th House was set on the opening day when Speaker John Boehner (R-OH) narrowly retained his leadership position due to 12 Republicans either abstaining or voting for somebody else. This portends a tough year for Boehner who may not last until December 2013 as House Speaker, and a tougher year for compromise.

 

The tone for the 113th Senate will be set when the chamber returns from recess next week when Senate rules reform (specifically, Rule 22, filibuster reform) is considered. The Levin-McCain bipartisan reform package would limit debate on the motion to proceed (thus the calendar would speed up slightly) and allows two guaranteed minority amendments. This is a great deal for Republicans because it allows them to offer amendments to bills where often they were precluded due to majority leader prerogative. If Majority Leader Harry Reid (D-NV) spurns that proposal for Senate Resolution 4 (which makes the motion to proceed non-debatable and enforces a talking filibuster, among other reforms) it will only pass via the constitutional option (less that the 67 votes required by Senate Rule V). To do so will infuriate Republicans and set a nasty tone for this Senate. That said S. Res. 4 is the better reform package but resisted by Republicans because it does not resolve the issue of the minority being able to offer amendments.

 

House Republicans and the White House have dug in their heels over the debt ceiling. There is little apprehension among House Republicans over shutting down the federal government; been there done that and will do it again (between November 1995 and January 1996 federal government employees were furloughed and non-essential service suspended for 28 days). The odds for any kind of agreement going into March is less likely than a Fiscal Cliff grand bargain was heading into the end of 2012.

 

Senate Republicans are acclimating to the idea to not allow an increase in the debt ceiling. Senator Ted Cruz (R-TX) is advocating this tactic to force the US Treasury to live within its means; prioritize expenditures (suggesting debt service be the first item paid) from revenue receipts and cut spending. Sen. Cruz is not alone in both the Senate and House Republican conferences. Congressional Republicans see a government shutdown as the pivot to balancing the budget, citing the ’95-’96 shutdown that they suggest led to government surpluses during President Clinton’s term. Now more than ever before House Republicans and some of those in the Senate are resigned to pursue the ‘starve the beast’ objective no matter the consequences.

 

These same GOPers do not see a credit rating downgrade as a realistic corollary to a government shutdown, attempting to place the onus on President Obama to decide what obligations to pay first out of existing revenue receipts. However, that perspective was distorted today when Fitch Ratings addressed the debt ceiling debate saying, “In Fitch's opinion, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline.” The potential for a downgrade of the country’s credit rating remains very real.

 

Look for continued dysfunction over the debt ceiling. The White House stated clearly it will not negotiate revenue and spending under the threat of default. After the Fiscal Cliff negotiation where Republicans miscalculated President Obama caving on taxes the WH should be taken at its word. House Republicans are kicking around the idea of raising the debt ceiling month-to-month to extract spending cuts and entitlement reforms, meaning dissentience as a way of Capitol Hill life.

 

Do not count on Speaker Boehner agreeing to any proposal that can only pass the House with less than a majority of the majority. One more vote like that and he’s done as House Speaker. House Democrats will resist the GOP hard edge approach for political reasons (reluctance to touch the third rails of Medicare and Social Security reform) and a rejection of austerity measures.

It is worth noting that Republican intentions are so determined that many congressional GOPers are getting comfortable with the defense cuts in the sequester if it means spending reduction.

 

While comprehensive tax reform is a challenge for the 113th Congress embraced by many Democrats and Republicans alike, the fact is that with multiple confirmations looming (State, Defense, CIA and Labor), the White House’s intent to pursue immigration reform, and the debate over gun control, tax reform gets kicked down the road.