Blackmail or Politics as Usual: Congress Nears a Spending Bill Deal

Source: Thinkstock

Source: Thinkstock

Here’s how a government shutdown sequel has almost been averted.

The stopgap spending bill financing a majority of the federal government’s activities expired Wednesday, December 11, meaning that without bipartisan action from Washington and an agreement between Republicans and Democrats, the federal government would have temporarily run out of funding. But, for now, money is flowing thanks to the successful conclusion of an acrimonious battle in the House of Representatives; by a narrow and partisan vote of 219 to 206, shortly before the midnight deadline on Wednesday, representatives passed a $1.104 trillion spending package that will keep the government operating through next summer. After a bitter fight between conservative and liberal factions in the Senate, the upper house of Congress also passed the bill late Saturday night, sending it to the White House for President Barack Obama’s signature.

No funding meant a government shutdown. Last October, the federal government began its first partial shutdown in 17 years after Congress failed overcome a partisan disagreement over the Affordable Care Act to pass a temporary spending bill that would have funded operations for the beginning of the new fiscal year. That took an estimated $24 billion out of the U.S. economy and shaved at least 0.6% off gross domestic product in the fourth quarter. Worse even than the economic hurt that Congress’s inability to compromise was the political fallout; economic confidence took a big step backward and congressional approval dropped further into dismal territory. Sure, some Republicans have claimed that the party’s midterm election success proved the shutdown did not harm to the GOP, but last November’s elections were far too complex to distill into such a simple message, especially one that encourages governmental dysfunction. Still, despite the cavalier attitude of some conservatives, the general tone driving the spending bill debates was a need to compromise; both President Barack Obama and Vice President President Joe Biden called wavering House Democrats while House Republican leaders wooed rank-and-file members. Of course, on an individual level, both Democrats and Republicans threatened the passage of the spending bill.

The $1.104 trillion omnibus spending package garnered significantly more support from Republicans as it includes a number of provisions Liberal Democrats hate — including Sen. Elizabeth Warren (D-Mass.) and Rep. Nancy Pelosi (D-Calif.), who expressed her “disappointment” in Obama in a speech on the House floor for backing a bill she saw as “blackmail.” It is blackmail in the sense that if Democrats do not support the omnibus bill alongside Republicans, a government shutdown will happen, meaning Democrats have to agree to Republican demands or bear the blame for more government dysfunction. Or, that is just politics.

Why is Nancy Pelosi yelling about blackmail?

“I’m enormously disappointed that the White House feels that the only way they can get a bill is to go along with this. That would be the only reason I think they would say they would sign such a bill,” Pelosi said. Despite the president’s request, she urged Democrats to vote no. “It is clear from this recess on the floor that the Republicans don’t have enough votes to pass the CRomnibus,” Pelosi wrote her colleagues, using the hybrid term for the two financial pieces of the proposed appropriations legislation: the broad omnibus spending package that would fund the government through the end of next September and the short-term continuing resolution that would fund immigration agencies until early next year. “This increases our leverage to get two offensive provisions of the bill removed: the bank bailout and big money for campaigns provision,” she wrote.

What is in the spending bill?

The CRomnibus legislation is a study in the ideological split in Congress. It is one part continuing resolution and one part traditional sweeping spending bill. The need for the continuing resolution was born with the Republicans’ opposition to Obama’s unilateral decision to defer deportations of approximately 5 million undocumented immigrants. House Republicans remain committed to preventing Obama from using his executive authority for what they term amnesty, but the party’s leaders decided against tying a policy rider defunding Obama’s unilateral reform initiative to the new government appropriations bills — the same tactics they employed in the effort to halt the implementation of Obamacare’s key provisions last yet. Instead, the Republican leadership plans to fund immigration agencies, like Immigration and Customs Enforcement, only through the beginning of 2015, at which time the next session of Congress will commence with the Senate’s new Republican majority and the House’s even larger Republican majority. Still, conservative Republicans — Sen. Jeff Sessions (R-Ala.) — like took issue with the spending bill because it did little to combat Obama’s executive order.

But for Democrats, the immigration fight can wait. More pressing is the sweeping changes the spending bill will bring to the financial sector. The must-pass spending measure also reflected a success for Wall Street. Since the Dodd-Frank Wall Street Reform Act went into effect four years ago, the financial industry lobby has been trying to persuade Congress to ease back. If the Senate passes this form of the spending bill, restrictions on risky derivatives trading — long opposed by big banks like JPMorgan Chase and its Chief Executive Jamie Dimon, who called the ban impractical — will be over. That Republicans were so quick to take up the desires of the banking sector is expected to embolden Wall Street to push for even deeper regulatory changes when Republicans take control of the Senate in January. Republicans did not focus on Wall Street when defending this move. Rather, lawmakers claimed rolling back the restrictions on derivatives trading will help bank customers, like energy and agriculture companies, that use swaps to hedge risks.

Both Pelosi and Warren also opposed provisions that would increase the maximum amount wealthy individuals can donate to political parties.

“We’re being asked to vote for a moral hazard. Why is this in an appropriations bill? Because it was the price to pay to get an appropriations bill,” said Pelosi on the House floor. “This is a ransom, this is blackmail. You don’t get a bill unless Wall Street gets its taxpayer coverage. It’s really so sad.”

Warren has voiced concern that the bill will greatly increase the influence of wealthy Americans. She campaigned all week in opposition of the CRomnibus. And if there is any consolation for Americans worried about the Republicans agenda for the next Congress it is the Warren-led uprising of Democrats in both the House and Senate. “Who does Congress work for?” she said during a floor speech this week. “Does it work for the millionaires, the billionaires, the giant companies with their armies of lobbyists and lawyers? Or does it work for all of us.”

The inclusion of the changes to Dodd-Frank and campaign finance law is deal-making at its best (or worst, depending on perspective). These two measures were included as policy riders to appropriations bill for key financial regulatory agencies. House Appropriations Chairman Hal Rogers (R-Ky.) and his Senate counterpart — Sen. Barbara Mikulski (D-Md.) — agreed to keep the provisions in exchange for more funding for Commodity Futures Trading Commission (a $35 million-hike to $250 million) and the Securities and Exchange Commission (a $150 million-increase to $1.5 billion), as congressional aides told Politico. The two agencies are woefully underfunded and necessary to the implementation of Dodd-Frank, but supporters of the agencies say the additional funding was not worth the trade off. Even worse, former Rep, Barney Frank (D-Mass.), the law’s namesake, worries “this is a road map for stealth unwinding of financial reform.”

“We faced 98 riders, some of which were highly controversial,” Mikulski said on the Senate floor, responding to her critics. “We did the best we could with them.”

Speaker of the House John Boehner (R-Ohio) seemed pleased. He said the provisions were “agreed to in this bill on a bipartisan, bicameral agreement.” And “while some members may have objected to this issue or that issue, nobody did this unilaterally. We’ve done this in a bipartisan fashion, and frankly it’s a good bill.” He added: “I’m a happy warrior.” Still, this spending bill sets up a new battle over immigration and leaves much unfinished business.

And for both Republicans and Democrats alike, be it the overturn of a key Dodd-Frank ban or silence on Obama’s amnesty agenda, one question rings loudly: Is a spending bill better than a government shutdown?

Follow Meghan on Twitter @MFoley_WSCS

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