MEMO From: CGCN Group Date: 6/19/2017 Donald Trump won the White House by defying just about every convention of modern presidential campaigns. He was outspent, out-organized and out-debated. And he courted controversies most politicians avoid, inviting intense media scrutiny. That scrutiny has only intensified since Trump took office, and the relentlessly negative press coverage appears to be taking a toll. But President Trump can’t be judged by the same measures applied to most of his predecessors, and his core supporters are more inclined to blame Congress and its leaders for any dysfunction in Washington. The media continues to press its narrative that Trump, besieged by controversy, is alone responsible for Congress’s failure to send bills to his desk. But even casual observers know that’s not true; Trump is just surfing a wave of dysfunction that has balkanized both parties since the first year or two of Barack Obama’s presidency. The tribalization is just as apparent in Bernie Sanders and Elizabeth Warren’s influence over the Democratic Party as it is in the occasional Freedom Caucus revolts against GOP leaders. Party leaders on both sides of the aisle have struggled to satisfy the demands of these ideological bellwethers. In this era of factional government, Trump has had the most success unifying his party. The fact of the matter is the Republican base is sticking with Trump. Fairly or unfairly, they will blame the media, Democrats and even congressional Republicans before they abandon the president. His loyal supporters cheer every decision the media decries – see: Paris climate accord. The biggest threat to the GOP’s legislative agenda (and its congressional majorities) isn’t Trump’s approval rating but the perceived lack of support for his agenda among rank-and-file Republicans in Congress. A narrative is emerging in conservative media that Republicans on Capitol Hill – not Trump and his self-inflicted wounds – are responsible for the president’s stalled agenda. A recent Drudge headline read: “Real ‘Resistance’: Republican Congress…” This is a dangerous dynamic for congressional Republicans. A recent BuzzFeed story highlighted the frustrations of grassroots conservatives in Iowa. “Republicans are letting him down,” said Mike Sipple of Ogden Iowa. "I just wish the Congress would give him more support," Grant Gardner another Cedar Rapids voter said. He wished members of Congress would get off their "hind-ends and do what they're supposed to do." Congressional Republicans need voters like Mr. Sipple to turn out in next year’s midterms. As we saw in the Virginia primaries earlier last week, Republicans could be facing an enthusiasm gap. Tomorrow’s special election in Georgia is an early test of that enthusiasm. A loss in Georgia will inevitably prompt the Washington political class to argue that Republicans should cut ties with Trump, but the midterm elections are still a year and a half away and doing so will only exacerbate the problem. Win or lose, the Georgia special election should serve as a sobering reminder that the political environment has started to shift away from the GOP, making legislating that much harder for Republicans. However, the president remains very popular in 90 percent of GOP-held districts and cutting ties will only serve to bring the already slow-moving agenda to a halt. The fastest way to reverse this trajectory is for Republicans to coalesce and put legislation on the president’s desk. CONGRESSIONAL AGENDA How Congress manages the run-up to the next two recesses (July 4th and the August recesses) will be critical. The House is in session for 13 more days and the Senate is in session for 14 more days before the July 4th recess. We are beginning to see signs that Members are becoming increasingly frustrated with the lack of legislative progress on high-profile agenda items. The House Freedom Caucus has already announced their desire to work through the August recess to try to achieve tax reform and make progress on other measures. Healthcare In the Senate, all eyes are on healthcare. Leaders are working with CBO on scoring legislative text, although major issues still remain unresolved. Medicaid, in particular, remains a thorny issue with Senate moderates pushing for a longer phase-out period of the 1101 K Street, NW, Suite 650 | Washington, D.C. 20005 | www.cgcn.com Medicaid expansion ushered in under Obamacare. Senate leaders are also grappling with how to address Planned Parenthood defunding and other abortion-related provisions included in the House-passed healthcare bill. Notwithstanding these issues and the exceedingly narrow margin for error – just three Republican “no” votes will sink any bill – Leader McConnell continues to drive his conference toward a vote before the congressional recess in July. Tax Reform This past week, Ways and Means Chairman Kevin Brady announced a change to the border adjustment provision that he previously outlined in his tax reform blueprint. He argues the change reflects the feedback he has received from Members over the past few months. It consists of a five-year phase-in of the provision to allow businesses to adjust to a new domestic-based tax system. Both the retail industry and Koch Industries immediately issued statements announcing their strenuous opposition to the change. The retailers even went as far as accusing the Chairman of “threatening” tax reform. For tax reform to have any chance of succeeding in 2017, the Administration, Senate, and House would likely need to come to an agreement on a policy in the next 60 days. This has sparked talk among some members of both the House and Senate making the case for working through the August recess. This is unlikely, but emblematic of clock management issues Members realize they are facing. From a procedural standpoint, Republicans still need to pass another budget with instructions to get the tax reform process moving. It is yet to be determined what kind of appetite there is for Republicans to pass another controversial budget even if it is simply to move the ball on tax reform forward. Complicating matters even further, the House Freedom Caucus has begun the process of laying out their own vision of what tax reform should look like, including tying it to welfare reform. Over the past few days, Members of the Senate are now talking about reviving elements of the controversial Camp Draft to generate the necessary revenue to pay for tax reform. This could actually have the effect of further dividing the business community. Congress is running out of both time and options. With groups like the retailers and the Kochs spending tens of millions of dollars to kill the House Republican version of tax reform in the crib, and the revival of elements of the controversial Camp Draft reemerging in the Senate, the odds of tax reform happening in 2017 continue to decrease. Banking/Financial Services With the House passage of The Choice Act, efforts turned immediately to reform and reauthorization of the National Flood Insurance Program (NFIP). Authorization for the existing program expires at the end of September. The House released a draft proposal and moved quickly to a mark up last week. Industry sought and received significant changes to the draft before the mark up. We expect the bill to move fairly quickly to the House floor where we expect members to offer amendments to "improve" the bill. The Senate Banking professional staff is engaged in the process of writing their version of NFIP Reauthorization. Language has yet to be released. Several members of the Committee have already introduced their own versions of flood insurance reform/reauthorization. Achieving a consensus Committee product will be no easy task. The process to create a final product that can pass both chambers is likely to face fits and starts right up to the deadline. We would not rule out the possibility of a short-term extension as the deadline approaches. The Senate Banking Committee continues to work through a process on Financial Reform/Regulatory Relief. Passage of the Choice Act meant nothing to the Senate Banking Committee. Any product produced by the Committee will need 60 votes under the current rules so Chairman Crapo is carefully laying groundwork to cultivate a process and environment where some bipartisan agreement can be reached. We do not expect to see any draft legislation soon. The Committee is likely to complete an exhaustive hearing process before they begin to try and put pen to paper on broad Financial Reform/Regulatory Relief. Energy The Administration is expected to continue rolling out its policy theme weeks by focusing on energy at the end of the month. We expect the Administration to focus on its commitment to regulatory and permitting reforms in the energy space as a central part of their American energy first plan. Congress will also be active in the energy space towards the end of the month. We expect that the House Energy and Commerce Committee will hold a markup to consider energy infrastructure permitting legislation, including a bill to streamline the permitting of natural gas pipelines, and we expect that the House Resources Committee will hold an oversight hearing on energy development issues on federal land. In the U.S. Senate, the Energy and Natural Resources Committee will be 1101 K Street, NW, Suite 650 | Washington, D.C. 20005 | www.cgcn.com holding budget hearings on the Department of Energy and Department of Interior budgets, with Secretaries Perry and Zinke testifying this week. Foreign Policy/National Security Due to the increased profile of security issues occurring around the world – and on the heels of broadly bipartisan Iran/Russia sanctions legislation passing the Senate -- we expect an emphasis on issues related to our national defense to play a dominant role this summer.