A CR-azy Week Ahead: We are now one week away from the March 14 government funding deadline and the backup plan – passing a continuing resolution (CR) until the end of FY25 – is moving ahead with support from President Trump. Congress will need to avoid a shutdown and move past FY25 funding to give them the space they need to focus on FY26 and passing the President's priorities through the reconciliation process.
Although the four corners had come to a tentative topline agreement, time is not on appropriators' side. It is still unclear if a year-long CR can pass either chamber, with several GOP members having never voted in favor of a government funding bill and little clarity on whether Democrats will support the measure. Speaker Mike Johnson (R-LA) and President Trump are each holding meetings with Republican members to shore up support. In the Senate, any funding bill will need seven Democratic votes. While conducting business through regular order is preferred and despite all of the uncertainty, we believe Congress can and will pass a full-year CR before the deadline next Friday.
Next Steps for Reconciliation: Although both the House and Senate have passed their version of a budget resolution, negotiations between the two chambers on a final package could take weeks. Leadership still needs to decide if a formal conference committee should be created or if the two sides will take turns sending amended resolutions back and forth until an agreement is reached. Despite these unanswered questions, the House Ways and Means Committee will start drafting the tax portion of the bill next week. Chairman Jason Smith (R-MO) has said that his goal is to get the bill on President Trump's desk by Memorial Day, a little over two months away. In our experience, that is an ambitious deadline.
Any reconciliation measure will need to be paid for, as discussed previously. Republicans are still trying to get creative on how to pay for their tax bill, including through tariff revenue. However, this strategy may be more of a talking point for Republicans, as tariff revenue generated by executive order cannot be included in a bill's CBO score.
Lawmakers this week flagged a potential problem with Republican leadership's plan to include the tax policies under the "current policy" baseline. The choice to "zero" existing tax provisions so that they have no fiscal impact could render them "extraneous" under the Byrd Rule and therefore render them unable to pass under a reconciliation package. Ultimately, this will be a decision for the Senate Parliamentarian, but these uncertainties could seriously wrench the GOP's tax strategy.
A New Strategy: Now that Speaker Johnson has decided that DOGE cuts would not be codified in a full-year CR, Senate Republicans have spoken to Elon Musk about using the formal rescissions process to claw back appropriated funds. This process would require DOGE, through the White House, to submit a package of cuts from programs it deems fraudulent or wasteful of which Congress would have 45 days to approve. Further a rescission bill is privileged, which means it has a fast track to the floor and is not subject to the filibuster; therefore, only 51 votes are needed in the Senate to pass the measure. This move would quiet the whispers of dissent among Republican lawmakers about certain DOGE cuts by allowing Congress to re-inject their influence into the agency's work. However, it also has political consequences that can be felt when Congress needs to pass new appropriations bills, which require 60 votes to pass.
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