Brett Flashnick
The U.S. Senate emerged from a 10-hour, late night vote-a-rama with an approved, “skinny” budget resolution that tees up an ongoing struggle in the House to pass either one budget bill or two that may include key tax reform issues of vital interest to the muni market.
“I hope the House can pass one big bill that meets President Trump’s priorities,” said Senate Budget Committee Chair Lindsey Graham, D-S.C.
“This approach provides money that we needed yesterday to continue the momentum on securing our border, enforcing our immigration laws, and rebuilding our military. Time is of the essence.”
Muni leaders are skeptical about a one bill approach in the House that would jam border security and defense spending into the same package as tax reform which could spell the end of the tax-exempt status of municipal bonds.
“ASA applauds the Senate for advancing a budget resolution in line with President Trump’s agenda and mandate from the American people,” said American Securities Association president and CEO Chris Iacovella.
“We look forward to working with the House to making sure any reconciliation bill that goes to the President’s desk does not interfere with the critical role municipal bonds play in job creation and economic growth.”
If the resolution is adopted by both chambers it will launch the budget reconciliation process which allows the Senate to bypass filibuster rules and pass legislation with a simple majority.
The Senate’s bill passed 52-48 and provides a blueprint containing $175 billion for border operations and $150 billion in defense spending. Sen. Rand Paul R- Ky., bucked his party by voting no.
The Senate moving early is an attempt to take defense spending off the table or at least offer a back-up plan in case the House can’t rally the troops for a one bill solution.
“I think the Senate said the quiet part out loud,” said Brett Bolton, VP Bond Dealers of America. ”They don’t fully believe that the House can pass the one big, beautiful bill.”
“That’s what I’ve been watching as that (Senate) bill doesn’t really cover much of what we’re looking at.”
The House has been making progress on their side of the table but there are already cracks showing in the attempt to address key provisions of the Tax Cuts and Jobs Act.
“Their budget outline passed the budget committee last week,” said Bolton. ”They’re leaking votes without providing much detail.”
“From my read, they’re proposing basically just an extension of the TCJA, and I don’t know if that covers campaign proposals such as raising the state and local tax deduction.”
“The Freedom Caucus is typically the loudest voice in the room. Now the moderates are flexing their muscles, whether it’s the SALT moderates or just moderates.”
The Senate Democrats tried to slow the resolution process down by introducing a slew of amendments that were shot down.
“Every step of the way, from the Budget Committee to the Senate Floor, Democrats fought to protect families and lower the cost of groceries, prescription drugs, rent, and housing. Republicans voted against every single one,” said Budget Committee Ranking Member Jeff Merkley D-Ore.
“The American people are sick and tired of this bait-and-switch of Republicans campaigning on fiscal responsibility and then governing by driving up deficits and debt at the expense of critical programs.”