In the event some other news captured your attention last week, the Senate did not take up the health care reconciliation legislation. Majority Leader Mitch McConnell determined that he did not have the votes to move the bill and decided to continue working on variations to the text that had been released last week. As was the case with the House bill, work will continue to achieve a compromise that could pass.

Senators have been suggesting additions and corrections to the draft legislation and McConnell will work to find a balance between the moderate and conservative proposals. His advantage is that the desires of each group are not mutually exclusive. Both sides can get something without alienating the other side. Both sides will have to compromise, but there is room to find a path to success.

The push to get an agreement last Friday was to keep the pressure on to negotiate and to get ideas to the Congressional Budget Office (CBO) so they can provide their advice on what the new proposals would do to their earlier analysis. Think of it more as a Chinese menu of options. Among the proposals will be a plan to spend more money on addressing the opioid epidemic, revising health savings accounts, and potentially more money to help states reduce premiums and deductibles. In the end they need to get a CBO analysis before they can move to the Senate floor. That makes the timing of getting ideas to CBO for them to cost out a critical element in the path forward.

The House did not report out an FY'18 budget last week. They were close but disputes over how much and where the mandatory savings will come from still exist. The FY'18 budget is critical because unless the House and Senate are able to agree upon a budget, there can be no tax recondition bill. In all likelihood, the House will develop their bill with increases in defense spending outside the caps that exist in law today - for more insight, Hedgeye's General Emo Gardner is remarkable on defense budget issues. They will also have a healthy amount of mandatory savings. The budget will come to balance in 10 years. The reconciliation instructions will propose revenue neutral tax reform. The Senate - when it takes up the budget - will go its own way. It is unlikely to change the caps because that would take 60 votes. The key issues will be handled in the budget conference report. The most important issues at this time appear to be spending caps, defense spending totals, mandatory savings and the instructions to the committee's for the reconciliation bill that will carry tax reform.

As mentioned previously, Speaker Paul Ryan and Ways and Means Chairman Kevin Brady continue to move forward on tax reform and want to be ready to pivot smartly when health care is finished. Their goal is to get a bill passed and signed by the end of the calendar year - a difficult challenge. . Keep in mnd that there are more moving parts to tax reform than there are to health care so the task ahead of them will be monumental. With tax reform sooner is always better, but it is not fatal if Congress completes reform in the first quarter of calendar 2018

David Hoppe was Speaker Paul Ryan's Chief of Staff and left his post in the Office of the Speaker in January 2017.