Washington’s Fall Agenda: Congress races to pass annual spending bills

Congress and the White House are facing a number of important issues this fall. But the clock is ticking with the November midterms looming and the end of the year fast approaching. Here’s a look at Washington’s agenda and the key stories The Hill will be watching in the months ahead.

It’s crunch time for Congress on its annual spending measures, a process that could result in a government shutdown over President Trump’s proposed border wall.

{mosads}Congressional leadership is trying to get nine of its 12 annual spending bills signed into law before the new fiscal year begins on Oct. 1. Instead of taking its traditional August recess, the Senate stayed in session to complete passage of the nine bills, zooming ahead of the House, which has only passed eight.

But challenges remain. The House and Senate have not yet successfully worked out key differences in any of the bills that have passed and have only a handful of legislative days in September to sort through those differences. The two chambers have not even agreed on how to allocate the spending among the different agencies, something they will need to work out before any of the bills can be sent to the president’s desk.

Congressional Republicans want to avoid lumping all the bills together because Trump had previously vowed never to sign another omnibus spending bill.

But even if Congress is able to push through on time, passing all nine bills and a stopgap continuing resolution for the remaining three, Trump has raised the prospect of vetoing spending bills that don’t fund his proposed wall along the southern border.

Congressional leadership, hoping to avoid a showdown before November’s election, has bundled the bill that deals with the wall — the Homeland Security spending bill — into the trio of bills it is putting off until December, alongside the bills that deal with State and Foreign Operations and the Commerce and Justice Departments.

Trump is said to be considering a showdown ahead of the November polls, convinced that immigration is a winning issue for his party. Even if he doesn’t, another faceoff could come in December, when the stopgap measure keeping the unfunded parts of the government open is expected to run out.

Spending isn’t the only big issue looming over Washington this fall. Here’s a look at the trade, tax and economic fights that are also ahead.

Trade

All eyes are on U.S., Mexican and Canadian trade negotiators to see if they can reach a three-way agreement on the 24-year-old North American Free Trade Agreement (NAFTA).

Trump has already announced that the U.S. and Mexico have reached an updated deal that would replace NAFTA, but without Canada. The ultimate aim is to include all three nations in the new agreement, but there are many obstacles ahead.

Trump has raised pressure on Canada to quickly agree to terms, threatening that the U.S. and Mexico could move ahead without them. But that plan could run into opposition in Congress.

U.S. Trade Representative Robert Lighthizer has said the administration plans to send the bilateral U.S.-Mexico deal to Congress as soon as this Friday, starting a 90-day clock for nations to sign the pact. Lawmakers, though, will be unlikely to approve any trade agreement until Canada is on board.

Canadian Foreign Minister Chrystia Freeland is already in Washington to resume talks.

Even if a deal is done by the end of the week, Congress won’t debate the pact until at least some time next year because of requirements under Trade Promotion Authority.

And if Democrats retake Congress in the midterms, that could make it harder for Trump to push through his trade agenda.

Meanwhile, the auto industry is keeping a close eye on whether the administration will impose auto tariffs on foreign cars. The industry has regularly argued against the tariffs — many foreign car companies have manufacturing plants in the United States — saying that U.S. consumers will certainly pay more for cars made here or abroad.

There are also questions about the president’s broader trade agenda — slapping tariffs on top allies and trading partners, as well as China — which has created great concern on Capitol Hill, in the business community and among U.S. farmers who are worried that the effects of tariffs will erase any gains from the Republican tax overhaul and cuts in regulations.

Regardless of the backlash, Trump has stood his ground on maintaining the tariffs of 25 percent on imported steel and 10 percent on imported aluminum, which hit close allies like Mexico, Canada and the European Union.

Trump also has been insistent on hitting China with waves of tariffs — $50 billion so far, with another $200 billion waiting in the wings — raising worries about a trade war. The White House argues that China makes a habit of stealing U.S. intellectual property and forcing American firms to transfer their technology to operate there.

This fall, Trump will face a crucial decision on whether to hit China with tariffs on $200 billion more in goods, with China promising to slap the U.S. with another $60 billion in duties.

Taxes

House Republicans have expressed interest in voting before the midterms on a package of bills they are dubbing “tax reform 2.0,” building off the tax law they passed last year.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) outlined the package in July and plans to bring legislation before his panel in September.

The centerpiece of the package would be to make the 2017 tax law’s cuts for individuals permanent. In order for lawmakers to use special budget rules to pass the 2017 law with a simple majority in the Senate, the individual tax cuts are set to expire after 2025.

The package outlined by Brady also includes proposals aimed at increasing incentives for taxpayers to save money and boost new business investment.

Many House Republicans see the tax package as a way to highlight their biggest legislative accomplishment since Trump took office, and the White House backs the efforts to pursue additional tax cuts this year.

But the legislation is unlikely to pass the Senate, where it would need 60 votes and Republicans only have a slim majority. The package is unlikely to even get a vote in the upper chamber before the midterms, because a few vulnerable Democratic senators could vote for it, giving them a legislative win ahead of the election.

More likely after the midterms, congressional Republicans could pursue legislation that makes corrections to drafting errors in the 2017 law.

Stakeholders such as retailers, nonprofits and tax professionals are asking Congress to make fixes to the tax law where the text of the legislation doesn’t reflect congressional intent and has resulted in unintended consequences.

A corrections package will need the support of some Senate Democrats to pass this year. Democrats have said they want fixes to the tax law to be paired with more substantive tax changes.

Economy

Trump’s feud with the Federal Reserve and its chairman, Jay Powell, is expected to heat up this fall as the central bank mulls how many times it should raise interest rates before year’s end.

The Fed has raised interest rates twice since Powell, a Republican, took over in February, and is expected to issue hikes again in September and December. Most Republicans and right-leaning economists support bringing rates higher to stave off inflation, but Trump has called on the Fed to hold off and support the booming economy with further stimulus.

There’s been debate within the Fed and among economists about whether it needs to hike rates if near-record-low joblessness isn’t driving inflation beyond the central bank’s target range. Fed officials have also been forced to reconsider the true neutral levels of unemployment, inflation and interest they use to shape monetary policy.

Powell acknowledged the difficult questions facing the Fed in a Friday speech, but said the way to manage the risks of a new economy is by gradually hiking rates as needed. That’s likely to infuriate Trump, who’s said he’s “not thrilled” with the chairman for cutting off easy money.

The Fed is also among several federal agencies with nominees pending before the Senate that are likely to be confirmed before 2019, including Kathy Kraninger, the nominee to lead the Consumer Financial Protection Bureau (CFPB).

Kraninger, an associate director at the Office of Management and Budget, is expected to be confirmed sometime before the end of the year along party lines. Kraninger has shed little light on her plans for the bureau beyond a general endorsement of acting Director Mick Mulvaney’s dismantling of CFPB powers.