WASHINGTON — Budget talks have begun between the White House and leaders in Congress, but the big question is who will sit at the negotiating table for Republicans.
House Majority Leader Rep. Kevin McCarthy on Oct. 8 dropped out of the race to succeed Speaker John Boehner, a surprise move that leaves an open race to lead the fractured party. Boehner, who planned to leave Oct. 30, said he would stay on until the House elects a new speaker — and as of Oct. 9, no date for that had been set.
At the White House after the news broke, presidential spokesman Josh Earnest said it would be easy for Democrats to poke fun at the Republicans' predicament if not for the serious issues Congress faces. The next speaker will have to tame a small vocal group of ideologues blamed for McCarthy's implosion, he said, and work in a more bipartisan fashion.
"It's going to be something that requires bipartisanship to pass," Earnest said of the budget. "It's also going to have to incorporate the views of Democrats in the House and the Senate."
Defense watchers worry that if Boehner cannot broker and force through a spending deal that raises the Budget Control Act spending caps, there may be no deal until after the November 2016 elections. That raises the risk Congress of further will kick the can using continuing resolutions, deemed a nightmare scenario by the Pentagon and defense industry.
Because a new speaker will have an even tougher time corralling his caucus, "Boehner will have to absorb all of the heat" and make a deal, Roman Schweizer, an aerospace and defense policy analyst with Guggenheim Securities, said in a note to investors.
On the flip side, Todd Harrison, a senior fellow at the Center for Strategic and International Studies, said negotiations will be stalled until the House leadership issue is resolved, "and then that doesn't leave much time."
That's because Congress must also tackle several pressing matters: An Oct. 29 deadline to renew transportation funds, a Nov. 5 deadline to raise the federal debt limit and a Dec. 11 deadline to fund the federal government, when the continuing resolution passed Sept. 30 expires.
Harrison said the best case would be a "mini-deal" that slightly increases caps for defense and non-defense spending, perhaps allowing somewhat less extra funding for overseas contingency operations (OCO) than Republicans want — but there is nobody empowered to make that deal for House Republicans.
"Until I see something concrete that people are actually negotiating, and it's the right people who have authority to negotiate, I don't think anything's happening," Harrison said.
For the Senate, Majority Leader Mitch McConnell, R-Ky., is said to be interested in making a two-year deal to prove, ahead of next year's elections, that Republicans can govern. The Senate's No. 2 Republican, John Cornyn, told reporters he would favor "doing as much as we can do, as soon as we can do it, not waiting until Dec. 11." Yet how politically feasible this is, is an open question.
"There are a lot of controversial items, spending, debt ceiling," Cornyn, of Texas, acknowledged. "I think there's a way to get there, and matter of fact, I don't think we have a choice but to get there one way or another."
For the White House, Office of Management and Budget Director Shaun Donovan is said to be in the lead and asking for three things:
• That $38 billion in base budget requirements for defense, funded in the Republican plan through the budget cap-exempt OCO wartime account, known as OCO — be matched dollar-for-dollar in non-defense discretionary programs. Such a move would require an easing of budget caps, likely funded by offsets of some sort.
(The OCO funding scheme has triggered a threat from President Obama to veto the defense policy bill that passed the House and Senate.)
• A "clean" budget deal that excludes riders such as a failed anti-abortion amendment for the CR last month.
• Power for the White House to allocate the matching funds for non-defense, considered a tough provision to stomach for Republicans whose control of Congress gives them appropriating authority.
According to Senate Minority Majority Leader Harry Reid, he and House Minority Leader Nancy Pelosi are a co-equal part of the negotiations, alongside the White House. Congressional Democrats are a necessary part of the process because House Republicans are unlikely to have the votes to pass a budget without them.
Campaigning for the speakership, Utah Rep. Jason Chaffetz told CNN that he rejected Senate Majority Leader Mitch McConnell's insistence that the GOP Congress would keep the government open and never default on the country's debt.
"I think it's wrong to signal that you're going to cave in the end," Chaffetz said when asked about McConnell's promise. "I think the Senate majority leader is wrong. I disagree with him."
Before McCarthy's departure, Sen. Chuck Schumer of New York and other Democrats called for such Republicans to be pushed aside so that negotiations could be quickly concluded.
"We're seeing candidates pledge economic destruction in order to win a few votes on the hard right caucus," Schumer said. "Well, the grownups in the Republican caucus need to grab the reins."
With a weakened Boehner at the table, the disarray among House Republicans actually tilts the negotiations in favor of House Democrats, as Pelosi will be relied upon to deliver her caucus to secure the deal, observers say.
"The White House may get some of what it wants because they are depending on the Dems to pass the damn thing," said Gordon Adams, an American University professor who oversaw national defense budgeting for the Clinton administration. "I don't know what the odds are on Boehner delivering a deal before he leaves in October."
Yet McCarthy's exit "ups the ante" for McConnell to work with Boehner to get a two-year cap-adjusting budget deal as soon as possible, said Mackenzie Eaglen, an American Enterprise Institute analyst. For defense, such a deal suggests a budget with increases close to Obama's requested levels.
If Boehner leaves without a government spending deal intact, "all bets are off," Eaglen said. The likely outcome is a full-year continuing resolution, "which could roll into a two-year CR when these same questions have no better answers next year."
Under a yearlong continuing resolution in 2016, the Pentagon would wind up with $35 billion less than it requested. At 2015 levels, the Defense Department would have a base budget of $496 billion, $3 billion shy of the $499 billion sequestration budget cap, but $3844 billion less than the president's $534 billion budget request for 2016.
Though a strict CR does not allow new-start programs or production increases, Harrison, of CSIS, speculated lawmakers will grant the Pentagon special authorities to divert money between accounts for priority programs the Pentagon names.
"Why would Congress want to cede that authority to the Pentagon, well, Congress' hands would be clean — and that could be a good election year strategy," Harrison said. "They wouldn't have their fingerprints on any of the things that needed to be cut."
For Arnold Punaro, chairman, National Defense Industrial Association, "the one ray of hope" against this scenario is President Obama's pledge Oct. 2 not to sign another CR. That increases the chances of a government shutdown, which is so disruptive it might create the political pressure to force a deal — if it doesn't happen before the Dec. 11 deadline.
"That says we're headed for something nobody wants, which is a government shutdown," Punaro said of the president's promise, "but out of a shutdown, you would get a compromise."