White House Budget Proposal to Kick Off Next Fiscal Fight

President Donald Trump is releasing his fiscal 2018 budget on Tuesday, the beginning of what could be a challenging, lengthy battle in Congress. Here's a guide to the budget path ahead:

What happens next?

Administration officials, including budget director Mick Mulvaney and Treasury Secretary Steven Mnuchin, will testify on Capitol Hill later this week to explain and defend the plan. Congress will get to work on its part after the Memorial Day recess.

What does Congress do first?

The House and Senate budget committees will write their own plans, known as budget resolutions. They are broad blueprints and won't necessarily detail specific agency budgets or programs that would be expanded or cut. To get adopted, the same version of the budget must get through the full House and Senate. Both chambers are controlled by Republicans, and they don't need Democratic help to adopt a budget.

What else is in the congressional budget resolution?

The resolution is likely to contain what are known as reconciliation instructions. Those are directions to certain committees telling them to write legislation on taxes or mandatory spending programs that don't have to be funded anew each year, such as federal employees' retirement benefits, Medicare and Medicaid. If a budget is adopted, those reconciliation bills can speed through the Senate and bypass the filibuster with simple majority votes. That means they could become law without a single Democratic vote.

Why do Republicans want reconciliation instructions?

Republicans plan a major rewrite of the U.S. tax system, and the budget resolution is like the key to the door that unlocks that prize. The instructions will set the maximum size of tax cuts over the next decade. It was during the budget resolution fights in 2001 and 2003 that Republicans capped the size of President George W. Bush's tax cuts.

Will it be easy for Republicans to agree on a budget?

No. The party is divided among those who prioritize defense spending, balancing the budget and cutting taxes. Placating each of those groups will be very challenging, especially in the Senate, where any three Republicans can derail the process. The defense hawks are chafing under years of budgetary caps. Budget balancers want the plan to erase the annual deficit within 10 years, if not sooner. The tax cutters say lower rates should be the priority to generate growth, even if it means lower tax revenue instead of a balanced budget.

What does the budget do for annual spending bills?

The budget sets the outline for what's known as discretionary spending for 2018, which covers national defense and programs ranging from housing to the National Institutes of Health. With the budget complete, the appropriations committees could start writing their bills. Those bills could be filibustered in the Senate, so Democrats could shape the ultimate outcome.

Does Mr. Trump have to agree with the congressional budget resolution?

No. The resolution just paves the way for later bills. The president doesn't have to sign the budget, and he can't veto it. He can shape it by stating his priorities, which he's doing this week. The White House gets more clout later -- when Congress starts passing tax and spending bills that the president has to sign to become law.

Is there a deadline for the budget?

Technically, the deadline was April 15. But there's no real penalty for delay. And actually, this year, Congress has a strong incentive to wait before finishing its budget. That's because lawmakers are still trying to complete work on the reconciliation bill allowed under the fiscal 2017 budget. That bill, which would repeal parts of the 2010 Affordable Care Act, has passed the House but not the Senate. If Congress adopts a fiscal 2018 budget before the 2017 budget, the 2017 reconciliation protections that allow a GOP-only vote would no longer apply. Senate Democrats could then block the health-care bill. So the 2017 bill needs to go first.

What happens if Congress can't agree on a budget?

At one level, nothing happens. Congress hasn't adopted a budget in eight of the past 15 years. Funding for programs that require annual appropriations runs out when fiscal 2017 ends on Sept. 30. As it has done in the past, with or without a budget, Congress will have to pass a bill to keep major pieces of the government open. But progress on a tax overhaul could stall.

Anything else we need to know about reconciliation?

Yes. Reconciliation bills can be expedited, but they do face some special constraints. They must be fiscal and they aren't allowed to increase projected budget deficits outside the length of the budget itself, usually 10 years. Fitting the GOP's tax priorities inside those rules would be a tough task for the summer and fall -- if the budget resolution gets done.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

May 22, 2017 12:51 ET (16:51 GMT)