Are we entering a new era in federal budgeting?
Interview transcript:
Terry Gerton Well, it was a busy week in Congress last week. Let’s start with the rescission bill, the one that got passed, $ 9 billion minus the $ 400 million that went to [the President’s Emergency Plan for AIDS Relief]. What did you hear as that was going through the process?
Loren Duggan That was a bill that was very partisan, and it was backed by Republicans. There were a couple of defections in the Senate, notably Susan Collins (R-Maine) and Lisa Murkowski (R-Alaska), but that bill is now a finished product and potentially the first of many rescissions packages based on what we were starting to hear toward the end of the week and what some people would like to see coming from the administration.
Terry Gerton Well, in fact, Office of Management and Budget Director Russ Vought stated pretty clearly that the administration plans to send more up, and that raised some flags on the Hill, didn’t it?
Loren Duggan It did. I mean, this is preferable, I would say to a lot of people than the unilateral withholding of funds. This is the process that the Budget Act set up in 1974; it hasn’t been used that much. This was the first time, I think in like 25 years, that a bill had actually made it all the way through the process. Other ones have been proposed, but didn’t make it over the finish line. So we’ll see if we get more of these. And obviously there are more targets for spending cuts across the administration. The Department of Government Efficiency (DOGE) effort had many more places in mind when it was making its recommendations. This package focused on the foreign aid and then the Corporation for Public Broadcasting, which helps fund NPR and PBS. Those were the targets of this one, but there could be more coming and Congress will have to deal with those.
Terry Gerton So we’re entering the last two months of the fiscal year, August and September; that’s when a lot of agencies actually execute the majority of their appropriation. So if there are gonna be more rescission packages coming, how should they think about their end of the year spending? Are there things that you think are easy targets that wind up in these rescission bills versus some that could be surprises?
Loren Duggan Well, I know the race to the finish is big for a lot of agencies, and for the contractors who do business with them. And we often focus on that at [Bloomberg Government] and elsewhere, but it’ll be interesting to see what pans out there. I think some of the targets might be [the Education Department], where clearly there’s a lot happening there and interest in winding down most of the department’s operations. So who knows if that’ll be a place where there will be some targets. And other agencies where there were significant curtailings or letting-goes of people, those might be places as well where you could see some interest in rescinding funds that have been provided. We’ll be waiting for those indications. And I’m sure the Hill and the administration are also working on this together because if there’s something they’d like to see clawed back and they could get that in the rescissions package, that greases it through this process, which requires just a simple majority in the Senate, unlike many other things that take 60 votes.
Terry Gerton Well, that’s a good framing. I guess if you’re an agency that’s already been or experienced a major impact from DOES, you might be one of the places that they would start to look for these additional rescissions.
Loren Duggan Potentially, yes. And as you mentioned, it’s getting toward the end of the year and the “pocket rescissions” concept, that maybe you’d withhold money within that last period of time because there’s a 45-day window when the request goes up until Congress can act on it. So that’s something, a dynamic that is concerning some people on Capitol Hill and elsewhere, and how that might play out. So definitely a tricky path here, and unusual because a lot of times you think the work is done when Congress passes appropriations, but this is showing that that’s not always going to be the case.
Terry Gerton Well, speaking of this kind of puts and takes when it comes to budget, Director Vought made some more news last week when he said that the budget process should be less bipartisan. How is that playing up on the Hill?
Loren Duggan That was poorly received. And what he’s pointing at is this 60 vote concept. To get anything through the Senate, you need some minority party support. So with the 53 Republicans, if they all hold together, they still need seven Democrats. So when it comes to September 30th, the need for likely a continuing resolution to get something over the line, they will need Democratic support. The concept of less bipartisan doesn’t work unless you radically change the process and how the Senate processes bills. That’s so far what we’ve seen. Our Senate appropriations bills that tend to be more bipartisan than the House versions that could help in a longer-term kind of final version of those. But there’s a lot between now and getting to those final versions that is already going to be messy without that hanging over. And the byproduct of some of this rescissions debate are Democrats who are worried about the process and, if we sign a deal today, how do we know that funding will still be there tomorrow? So there’s a lot going on and that didn’t help, I would say.
Terry Gerton I’m speaking with Loren Duggan. He’s Bloomberg government’s deputy news director. Well, speaking of appropriations, some things are starting to move forward. We’ve got two versions now of an NDAA. It’s not an appropriations bill, but a big precursor to that. What is next, what is coming next in the appropriations process?
Loren Duggan Yeah, it’s like things were slowed down during the “One Big, Beautiful Bill,” and that has been removed. So a lot is flowing. The NDAA, I don’t know if we’ll see action on either the House or Senate version before the August recess. That could be something they get to in the fall when they come back. On appropriations, we’ve seen two bills get through on the House side, through the full chamber. And the Senate has set up a vote for this week on the military construction VA bill, a fairly non-controversial one. That could end up being the vehicle for more than just that set of appropriations though. So getting some floor action going, committees are up and running and churning out a lot of votes and bills with the more partisan approach, I’d say, in the House. More bipartisan so far in the Senate. And we’ll see how many they can get done before they head out for their respective August breaks. But a lot has been flowing at least on the bill side for appropriations.
Terry Gerton Well, and it sounds like the FBI relocation problem got settled so that the Commerce Justice Science Bill can move forward in the Senate, correct?
Loren Duggan That’s correct. That was an initial hiccup. They met a week earlier and tried to do that. That amendment sort of stuck things in a stasis for a week and they finally resolved that, got it taken care of. The language that was causing problems, I believe, is out of the bill. So that can move forward potentially, maybe as part of that minibus package in the Senate or maybe in a different package later on.
Terry Gerton Well, and in a different take on finance, the House was working on some crypto bills and the President actually signed the GENIUS Act. So what is the status of the crypto conversation between both houses?
Loren Duggan Yep, that took a while. It was supposed to be crypto week and they thought they’d spread it out a little bit, but it all happened pretty much on Thursday afternoon. The GENIUS Act is about stable coins, which are pegged to an asset. And that bit of regulation has now been signed into law. The Senate had passed it first and the House cleared it. There were some House lawmakers who wanted changes to that. And maybe they’ll work to attach those to later legislation, such as the CLARITY Act, which was the broader bill that was passed in the house. And that’s a more of a regulation for the digital assets marketplace more broadly. And then there was a third bill in the mix that would ban the Federal Reserve from issuing a central bank digital currency, which in particular Republicans were concerned about and want to see that language move somewhere, whether it’s on its own or attached to something else. So three big bills, one is over the line and signed into the law. There may be changes to that as they deal with some of these other crypto measures as well. But for now, it’s landmark to have crypto legislation get through both chambers and signed by a President. So pretty big deal.
Terry Gerton It is, and it’s key to the whole blockchain methodology. So we’ll see how that plays out. So what are you watching for this week?
Loren Duggan I’m seeing what else they try to get done before they head out on break. The Senate has more nominees they want to get through, start churning through some district court nominees. And maybe another circuit court judge, the President’s former personal lawyer, Emil Bove, was approved by committee. They might try to get him through, and Jeanine Pirro, the former Fox news host who’s now the acting D.C. attorney and is up for the job could try and get through before they go. And a lot tends to happen right before that August break. So they can clear the decks a little bit for all the business they have. And September 30th is sooner than it seems when we’re still talking about July and summer holidays, but that date’s gonna be really key and whatever they can do ahead of that in July will be of interest.
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