Predictions a day before the midterm elections still favored Republicans regaining control of the Senate as well as picking up seats in the House, but political watchers are questioning the likelihood that a tax extenders package will pass in the lame-duck session and are looking to the impending debt limit deadline.
Washington Analysis reiterated in its Friday commentary Republicans’ 65% chance of regaining the Senate this year, with “virtually zero chance that they [the GOP] will lose seats in either chamber.” Instead, the GOP is expected to gain five to 10 seats in the House as well.
Greg Valliere, chief political strategist at Potomac Research, said in his Friday commentary that passage of the “huge” tax extenders package retroactive to Jan. 1, 2014, in the lame-duck session “may be in trouble,” as the price tag for a two-year extension of the extenders “is at least $85 billion, and no one has any idea how to pay for that.”
Rep. Paul Ryan, R-Wis., the “probable” new chairman of the House Ways and Means Committee, “believes the House doesn’t have to pay for tax cuts,” Valliere says. “But he [Ryan] faces opposition from fiscal conservatives who ask why the government should be picking winners and losers in, for example, energy efficiency tax credits. And besides, passage of these extenders could complicate the drive for fundamental tax reform next year.”
Valliere adds that Congress could perhaps “pass a handful of important extenders — such as the research and development tax credit — during the lame-duck session.”
IRS Commissioner John Koskinen told members of the Senate Finance Committee in mid-October that Congress should act on the extenders package “no later than the end of November,” stating that the IRS was “currently facing a great deal of uncertainty related to the expired provisions, which raises serious operations and compliance risks.”
Koskinen urged members of Congress to act swiftly in passing tax extenders that expired in 2013 in order to prevent disruptions in the 2015 tax filing season.
On the fiscal policy front, Washington Analysis opined Friday that Republicans’ No. 1 goal will be to enact tax reform. However, “the odds start out well below 50% that they are successful, but this one is worth keeping an eye on for potential breakthroughs,” noted analyst Joe Lieber.
The debt limit will also be “front and center” after the first quarter of 2015, he said. “The debt limit is suspended until March 15, 2015, but with extraordinary measures, Treasury can extend that deadline by a few weeks. We would expect little market concern about a potential default if [John] Boehner, [R-Ohio], survives as speaker, though we would anticipate that some sort of small package would accompany the debt limit extension.”
If Boehner is “challenged for [House] speaker or decides not to seek the leadership position — the odds of which we put at around 5% — then the debt limit fight could be reminiscent of July-August 2011 should a much more conservative Republican, such as House Financial Services Committee Chairman Jeb Hensarling (R-Texas), become the next speaker.”
— Check out Washington Watchers See Big Retirement Push in 2015 on ThinkAdvisor.