BLOCKBUSTER BUDGET AT THE 11th HOUR:
Outline of budget agreement here:
The Senate will vote today on a Continuing Resolution to keep the government funded until March 23 allowing for the requisite time for the FY18 Appropriations bills to conform with the massive new budget totals agreed upon by Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer, House Speaker Paul Ryan and Minority Leader Nancy Pelosi. The measure reverses the defense sequester and increases total defense funding to match FY18 NDAA levels and the Trump Administration’s request for FY19. Incidentally, smart move yesterday by the Administration in trotting out Defense Secretary Jim Mattis at the White House press briefing to show his and the Administration’s support of the deal. The Senate CR also increases non-defense levels and targets funding for priorities like NIH, opioids, and infrastructure and includes $80 billion in emergency spending for disasters caused by Hurricanes Harvey, Irma, and Maria, as well as the California wildfires. And finally, it provides an extension of the debt limit to March 1, 2019 – comfortably past the November midterms. We see McConnell finding more than enough votes to pass the bill today then ping-ponging it back to the House at some point early evening with just hours to go before funding expires at midnight.
STRANGE BEDFELLOWS: Ryan is now left to wrangle support from 218 House members to get this massive deal over the finish line. And he still has his work cut out for him. On the Republican side, he is certain to lose a good chunk of conservative members and true blue deficit hawks (if there are any left these days). Perhaps as many as 70-80. And that leaves Ryan to scrounge for votes on the Democratic side of the aisle without the help of Pelosi - who is not supporting the deal (that she helped negotiate) and who is losing her leverage but not her voice given her stand on immigration yesterday. While House Democrats may be fired up over her DACA rallying cry, they will be free to vote as they choose.
We heard last night that a package unveiled by the leadership of $100B in offsets - TSA user fees and custom fees, selling more oil from the SPR, surplus funds from the Federal Reserve to name a few - are intended to “pay for” most of the non-defense increases and has neutralized a number of House Republicans. You stitch that group together with defense hawks, members of the Texas delegation (disaster relief) and Democrats who are inclined to vote for the bill given that increases in domestic spending realize priorities in areas they’ve supported for years - and we are cautiously optimistic that Ryan will pull this one off in the next 16 hours. It’s worth noting, however, that there is mounting pressure being applied to Republicans in both chambers by conservative think tanks and advocacy organizations in opposition to the deal, but it may be too little too late. Please email us with questions throughout the day as we’ll be on and off Capitol Hill monitoring developments.
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 tomorrow at 10am ET. Dial-in details here.
WAY IS PAVED FOR HHGM VIA CR BUT DIFFERENCES REMAIN BETWEEN HOUSE AND SENATE: Our Senior Healthcare Analyst Emily Evans writes on identical language on implementation of HHGM; new schedule to rural add-on; behavioral adjustment concerning; MB Override 1.4 or 1.5%? Her note here:
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.
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.
