JT TAYLOR: CAPITAL BRIEF

 

KEYSTONE COPS - CR STATE OF PLAY:

HOUSE: The current continuing resolution (CR) expires at midnight on Thursday, February 8, and the House has taken the lead in drafting the new stopgap measure. The new measure went to Rules Committee late last night and will provide for a full year of funding for the Defense Department and extends government funding at current levels until midnight on March 23, and will contain a number of healthcare provisions, including funding for Community Health Centers, DSH, and Medicare extenders, which could attract both Republican and Democrat votes. In addition, the White House has requested a number of anomalies including $90 million for the implementation of the tax legislation and $225 million in emergency funds for the Small Business Administration for disaster assistance. Congress is faced with a tight deadline this week due to the House Democrat retreat, which begins tomorrow.  As it stands, House Republicans will run a whip check late this morning when votes start and leaders expect passage sometime after 7:00 pm tonight. Here are the highlights:

• Extends government funding to March 23, 2018
  

• Includes anomalies requested by the Administration and continues the extension of the National Flood Insurance Program (NFIP) for the duration of the CR
• $225 million for SBA’s Disaster Loan Program to provide assistance to homeowners and businesses trying to recover from the hurricanes
• $51 million to avoid delays in preparation for the 2020 Census
• Authorizes the Department of Energy to make sales from the Strategic Petroleum Reserve
• Provides operating funds for the Southeastern Power Administration, which are fully offset by collections from power customers

• FY18 full-year Department of Defense Appropriations 
  • A total of $659.2 billion for full-year funding for the Department of Defense, including $584 billion for base and $75.1 billion for OCO
    • Funding is fully consistent with the enacted FY18 NDAA
  • Includes $1.2 billion requested by the President for 3,500 additional troops in Afghanistan, funds the 2.4% pay raise for the troops, and increase in end strength for the Active Duty, Guard, and Reserve troops
  • The House passed a nearly identical bill (H.R. 695) last week by a vote of 250-166
• Health Extenders 
  • 2-year extension of Federally Qualified Health Centers (community health centers)
  • 2-year extension of Public Health Programs
  • Averts FY18 and FY19 Medicaid Disproportionate Share Hospital Reductions
  • Provides for permanent Medicare improvements:
    • Repeal of the Medicare payment cap for therapy services
    • Removal of the rental cap for durable medical equipment under Medicare with respect to speech generating devices
    • Extension of Special Needs Plans in Medicare Advantage
  • 2-year extension of Medicare policies:
    • Funding for quality measure endorsement, input, and selection
    • Medicare-Dependent Hospital and Low-Volume Hospital programs
  • 5-year extension of Medicare policies with reforms:
    • Home health rural add-on payment
    • Ground ambulance add-on payments
    • Ground ambulance payment modifications

SENATE: When the House passes their version of the CR tonight, the Senate will either take it up and pass it without modification or amend it and send it back to the House. If the Senate decides to amend the House CR, a likely scenario includes language raising the budget caps by ~$300 B over two years, as well as disaster relief, opioid and tax extender provisions.  The Senate would subsequently send the bill back to the House at some point on Thursday. At this juncture, it is unclear whether the extenders effort will be successful. Senate Democrats have not cleared the package as of Monday and, historically, there has been less incentive for the House to adopt tax extenders on continuing resolutions. Conversations and negotiations over flood insurance are ongoing, and the same suite of issues remain unresolved.  We believe a final deal likely will be made up of parts of various Senate and House bills unless Speaker Paul Ryan is forced to take a CR stripped of the defense language - thereby setting up a stare down on Thursday.

KEYSTONE STATE CHAOS: Following up to a piece we wrote a few weeks ago, the U.S. Supreme Court denied the request by Pennsylvania Republicans to delay redrawing the state’s congressional districts throwing Republican grip over 13 of the 18 seats into question with ramifications for the 2018 midterms. We’ll have more on this soon - as well as similar challenges in Texas, Wisconsin and North Carolina.

PENTAGON WILL BE FINE ON OTHER SIDE OF CR SPASM: Our Senior Defense Analyst General Emo Garder writes while a full year DoD budget may not be included in this week's CR, both sides have agreed on an eventual level of discretionary spending.  Read his piece here.

VERIZON'S 5G LEAD (VZ, T, CCI, ZAYO, DY): Our Senior Telecom and Media analyst Paul Glenchurt writes that a hard push for upper band auctions this year, delays likely reinforce Verizon's 5G lead. Paul's piece here.

SYRIA | SLIDING INTO A STRATEGY?: General Dan Christman writes on the emerging angst with U.S. strategic interests in Syria.  Read his latest piece here.

IT'S A MAD, MAD, MAD, MAD WORLD:  The global scene is more confusing and jumbled now than we have witnessed in at least half a century. But amidst this bedlam, what are the true geopolitical risks that could impact business investment and operations? General Dan Christman will discuss what he sees as a small group of top risks, and where business leaders need to be vigilant on a broader range of secondary issues. Join us on Friday, February 9th at 10am ET.  Dial-in details here.

LEGAL CATALYSTS: FEDERAL COURT CLEARS PHH OF KICKBACK LIABILITY (PHH): As we anticipated, a federal appeals court lifted a $109 million penalty against PHH Corp. in a high profile constitutional case.  Read Paul Glenchur's piece here.