Expect GOP senators to rally, back American Health Care Act
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The repeal and replacement of the Affordable Care Act (ACA) is the first step toward broader tax reform later this year. The Republican strategy is to pass the American Health Care Act (AHCA) first as part of the final budget resolutions for fiscal year 2017.

The effective deadline for this legislation to be passed by both chambers of Congress is April 28, which is when the continuing spending resolution for the current fiscal year expires. However, as we discuss below, there is much less time available on the congressional calendar.

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Republicans are attempting to pass healthcare reform through the “reconciliation” process, which means that both the House and Senate will pass their respective proposals. The differences between the two bills will then be “reconciled” in joint committees of the two Chambers of Congress before a final bill is presented to the president.

This bill, however, has to be revenue neutral, meaning it cannot add to the budget deficit. However, the advantage of this approach is that only a simple majority is needed for budget legislation to pass in the Senate, where its fate is more uncertain.

This is because Republicans have 237 seats in the House out of a total of 435, and "only" 218 votes are needed. We expect the AHCA to pass when Speaker Ryan brings the bill to the House floor on Thursday. While there is some concern that the Freedom Caucus, a group of roughly 40 House conservatives who have not endorsed the bill, may indeed block it, we believe this to be a low-probability event.

Since much of the Trump agenda rests on the ability of the Republicans to pass healthcare reform, its failure would seriously dent the party's political capital and imperil other legislative actions. For this reason, we expect Republicans to ultimately come together, even in the Senate.

Republicans have a small majority in the Senate — they hold 52 out of 100 seats (two independents tend to caucus with the Democrats). There are other reasons why we believe the Senate will pass the AHCA. Once the House passes the bill, Senate opposition (at least among Republicans) should lessen.

This is because there will be a House bill that ostensibly will have some tweaks that will make it easier for more moderate Republican senators to support. Moreover, it will be more difficult politically for Republican senators in the majority party to vote against a bill that their colleagues in the House support.

Perhaps most important of all, there is still room for Senate compromise, in part because the Congressional Budget Office/Joint Taxation Committee's initial scoring of the AHCA showed a $337 billion reduction in the budget deficit.

This should allow Senate Majority Leader McConnell (R-Ky.) the ability to negotiate more favorable terms with those members of his party that may have reservations, perhaps by expanding Medicaid block grants or increasing the tax credits for lower income households.

The Congress effectively will not be in session from April 6 to April 24 — most of this period is the spring recession. This means once Congress returns from its scheduled hiatus, there will be only four days to pass FY2017 budget legislation before the current continuing resolution expires.

Otherwise, the government could potentially shut down. We obviously do not expect this to happen. Hence, we expect the contours of the AHCA to take shape before April 6.

 

Joseph LaVorgna is the chief U.S. economist for Deutsche Bank. Brett Ryan is a senior U.S. economist for Deutsche Bank. 


The views expressed by contributors are their own and not the views of The Hill.