House Republicans face the possibility of failing to pass a full budget resolution for the second year in a row, despite making progress on their goals for a fiscal 2018 budget resolution.

The stakes are much higher than last year as the budget, through the reconciliation process, has become a tool for Republicans to advance legislation without Democratic support, something they lack on nearly all of their top priorities.

Passing a budget resolution is key to the GOP goal to overhaul the tax system and helps kick-start the appropriations process because it sets topline budget numbers. Failure to adopt the fiscal blueprint would further illustrate how Republican divisions are stalling the legislative agenda in a year where GOP leaders have ambitious goals under unified government.

“If we do not get a budget, most of what we want to accomplish as Republicans will take a major setback,” House Freedom Caucus Chairman Mark Meadows of North Carolina said.

Rep. Tom Cole, who serves on the Budget and Appropriations committees, said finding agreement on the budget is always difficult given competing priorities among defense hawks, fiscal conservatives and appropriators, but it’s become more so after the House failed to get a deal last year.

“We’ve proven that Republicans can actually fail at [adopting] a budget when we’re in the majority,” the Oklahoma Republican said. “We’ve never done that before. I thought it was a really bad thing then. I think you’ll see the consequences more [now].”

Topline targets

The budget resolution, which will be among the topics discussed during a House Republican Conference meeting on fiscal issues on Wednesday (it was originally expected to be discussed at a meeting on Friday but was moved up), is where lawmakers typically unveil a topline spending number for the upcoming fiscal year. Last year, disagreement over the topline is what prevented House Republicans from passing a full budget; Senate Republicans never really tried.

The topline spending number is still a point of contention. The spending caps enacted as part of the Budget Control Act of 2011 set fiscal 2018 spending levels at $549 billion for defense and $516 billion for nondefense discretionary funds.

Any changes to those topline levels need to pass both chambers of Congress to be enforceable, requiring 60 votes in the Senate.

Most Republicans want to boost defense spending (although they do not agree on the amount), but Democrats would likely only agree to a defense increase if it includes hikes in domestic spending. Previously, Democrats have insisted on, and secured, a dollar-per-dollar increase, something that is a “nonstarter” for conservatives, Meadows said.

In a meeting Thursday, Republicans on the House Budget Committee discussed topline spending numbers of $620 billion for defense — about halfway between President Donald Trump’s proposed $603 billion and the $640 billion called for by defense hawks — and $511 billion for nondefense discretionary spending. Such a split, which is not finalized, is unlikely to get Democratic votes, and it’s unclear if it could garner enough Republican votes.

GOP appropriators have expressed concern about moving forward with budget numbers that Democrats have not agreed to because it could create problems with getting the appropriations bills done. 

“Anybody that thinks you’re just going to deal the Democrats out of the appropriations process is just being naive,” Cole said. 

New complications

Finding the sweet spot on spending is more complicated this year because it’s become wrapped up in Republican negotiations over what fiscal policies to include in the budget’s reconciliation instructions. The plan the GOP had mapped out in January was to use the fiscal 2018 budget reconciliation process to overhaul the tax code, but some Republicans are pushing for more.

House Freedom Caucus leaders have said their hard-line conservative membership, which prefers a lower spending baseline, is open to an increase in the topline number in exchange for a specific dollar amount of mandatory spending cuts in the reconciliation instructions.  While the Freedom Caucus has yet to take a position on a specific proposal to that end, they’ve been discussing the idea of looking to welfare programs such as the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families to achieve savings.

“If the budget reconciliation [instructions] are definitive and preconditioned, then you’ll find great flexibility on spending numbers of those fiscal conservatives who believe that they can make some short-term adjustments in exchange for long-term mandatory reforms,” Meadows said.

Leadership has been toying with the idea of including mandatory spending cut instructions but have yet to publicly back any specific proposal. Behind closed doors, they’ve discussed tasking each committee with spending jurisdiction with finding $1 billion in savings, but Meadows said that would not be enough to appease conservatives.

Budget Committee Republicans discussed a target of $150 billion in mandatory savings during their Thursday meeting. That number may be too much for moderates to stomach.

Further complicating matters is a perception among some members that the Senate may not pass a budget.

“Is the Senate interested in passing a budget?” New York GOP Rep. Chris Collins said. “Because we’re not so sure that they are. And if we don’t have an indication that we’re on the same page as the Senate, why would we in the House work on something that’s going to be very controversial and give our opponents lots of potential to distort, exaggerate or highlight things that would not be helpful?”

Collins said there’s an interest among moderate Republicans in a bipartisan tax overhaul, which would eliminate the need to use the budget reconciliation process.

“If we try to do this on our own, it’s fraught with peril,” he said. 

A Senate GOP aide said the chamber does intend to pass a fiscal 2018 budget resolution but the timeline for that remains unclear. The Senate is currently busy trying to find the votes to pass a health care overhaul, which is moving through the fiscal 2017 budget reconciliation process.

Chairwoman’s optimism

House Budget Chairwoman Diane Black of Tennessee has met with the Freedom Caucus, the Tuesday Group and the Republican Study Committee in recent weeks to gather ideas across the conference. Despite the differing opinions on the topline, as well as what should be included in the reconciliation instructions, Black has expressed confidence that the House will pass a budget this year.

“We’ll get something done,” she said last week. “It’s just a matter of making sure we have all the pieces together.”

Some more pessimistic members have raised the prospect of needing to pass another so-called shell budget, the bare minimum needed to set up the reconciliation process for a tax overhaul. Republicans passed a fiscal 2017 shell budget earlier this year to create the reconciliation instructions for a health care overhaul but billed that as a one-time solution.

GOP leaders may struggle to find the votes for another shell budget, if it comes to that. But they’re hoping it won’t.

“We’re going to put out a budget that’s a real budget,” Black said. “No shells.”

Paul M. Krawzak and Joe Williams contributed to this report.