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Regulatory: Deficit reduction and efforts to defund agency regulations

Congress will consider a pair of “must pass” laws this fall.

The debt ceiling compromise has set in motion two parallel legislative processes that might give a determined minority leverage to defund major regulatory initiatives if it could position itself as the swing votes on passage of a deficit reduction law. Measures adopted by the Environmental Protection Agency and the National Labor Relations Board are most at risk.

This fall, Congress will consider two “must pass” laws. The first measure is a deficit reduction bill, which would seek targeted deficit reductions of $1.2 trillion in order to avoid an equal amount of indiscriminate, across-the-board spending cuts. The second is an omnibus appropriations bill to fund all federal agencies. The possibilities for vote trading between the two bills will create a complex legislative calculus.

The centerpiece of the debt ceiling compromise is a gun that Congress is holding to its own head. The law provides for $1.2 trillion in pro rata spending reductions for all covered accounts unless Congress passes by December 23 and the President signs a deficit reduction bill providing for $1.2 trillion in reduced spending and increased revenues. Responsibility for negotiating the measure rests with a 12-member Select Joint Committee on Deficit Reduction, with six members from each house and each party. The committee has until November 23 to approve such a bill by majority vote. If the committee fails to adopt such a measure, or if either house rejects the committee’s bill, or if the President vetoes it, then across-the-board spending cuts will occur automatically.

This process resembles the Gramm-Rudman-Hollings sequestration mechanism that Congress adopted in 1985 to resolve the last debt ceiling crisis. Under that process, when Congress failed to reduce the deficit to the targeted level, pro rata spending cuts were imposed in 1986 to reduce the deficit to the required level. The 2011 mechanism makes more of the defense budget subject to automatic spending cuts in the hope that the adverse effects of across-the-board reductions on national security will persuade Congress to reach a deficit reduction compromise.

The President will have little role to play in this process. The deficit reduction bill will be negotiated by the committee. And the President realistically could not veto a measure that passes both houses for fear that he would thereby take ownership of painful budget cuts that will be highly unpopular.

While efforts to negotiate a deficit reduction law are underway, it is likely that Congress also will, as in 1985, develop an appropriations bill that funds all federal agencies simultaneously. A potential impasse has been developing on the appropriations front. Throughout the year, the House has adopted appropriations riders that would deny EPA funding to promulgate rules implementing existing statutes. These provisions were expected to die in the Senate under Presidential veto threat.

House Republicans, however, have recognized that the intersection of the deficit reduction bill and the appropriations measure may provide an opportunity to repackage their regulatory rollbacks as a jobs program and seek to obtain riders that could never pass in the regular legislative process. On August 29, the House Majority Leader circulated “a list of the 10 most harmful job-destroying regulations” Republicans will seek to defund, including seven from the EPA and two from the NLRB.

An important issue this fall will be whether a blocking minority can be organized—and can hang together under intense pressure—that would be prepared to block passage of a deficit reduction bill unless the Senate and the President agree to defund some regulatory initiatives.  

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John Cooney

John F. Cooney is a partner in the Washington, D.C., office of Venable.

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