A little-known Senate budget rule could pose a huge challenge to the GOP’s top priorities of increasing defense spending and cutting taxes this year. 

Providing more funds to the military and rewriting the tax code both depend on the House and Senate agreeing to a fiscal 2018 budget resolution. The fiscal blueprint would set an enforceable topline for appropriators and provide reconciliation instructions allowing a tax overhaul to advance in the Senate with a simple 51-vote majority.

Because of the importance of a tax overhaul to the GOP, it is even possible House and Senate Republicans will end up trying to pass a second bare-bones budget resolution — this one designed to provide reconciliation instructions for taxes — instead of a full budget resolution. After they failed to agree on a fiscal 2017 budget resolution last year, Republicans in January wrote and adopted a pared-down budget to provide reconciliation instructions for repealing the 2010 health care law.

The fiscal 2018 budget resolution already faced serious obstacles because Republicans are divided over how much to cut spending and whether to again chart a path to balancing the budget in 10 years.

The Senate rule, embedded in budget law, makes the job even harder. Enforced by a point of order, the rule prohibits consideration of any bill, resolution or conference report that would cause discretionary spending limits to be exceeded. Senate Budget Committee GOP staff confirmed that the rule applies to budget resolutions.

As a result, it will be nearly impossible for the two chambers to adopt a fiscal 2018 budget that would raise base defense spending above the $549 billion defense cap. It would take 60 votes to waive the point of order in the Senate, meaning Republicans would need Democrats’ support. Democrats are sure to object to any increase in defense spending without a corresponding boost in nondefense spending.

In his fiscal 2018 budget, to be released later this month, President Donald Trump is expected to ask Congress to raise defense spending by $54 billion and pay for it by reducing domestic spending by the same amount. The caps are set in law, so any attempt to raise them would ultimately require a change in law, which needs 60 votes in the Senate.

Republicans on the House Budget Committee are already beginning to struggle with how much money to allocate to national defense and other funding categories as they work on the next budget resolution behind closed doors.

“No decisions have been made about that yet, but that is something we’re going to have to look at,” House Budget Chairwoman Diane Black told CQ Roll Call when asked about defense funding and the point of order. The Tennessee Republican said the committee’s actions will be based in part on what Trump proposes and “what the conference’s desire is.”

The point of order against exceeding the caps does not apply in the House. It nevertheless poses a challenge for the House Budget Committee because the budget resolution must be adopted by both the House and Senate to take effect.

Florida Republican Mario Diaz-Balart, a senior appropriator who sits on the Budget Committee, favors higher defense spending but said it’s unclear how the budget resolution will address defense. “We’re at the beginning of that process,” he said.

With the debt approaching $20 trillion, South Carolina Republican Mark Sanford, another Budget Committee member, advocates sticking to the spending caps. “In a perfect world we would allow for more robust defense expenditures,” he said. “We don’t live in that perfect world.”

The caps on discretionary spending established in the 2011 deficit reduction law will drop in 2018, meaning that, barring a change in law, Congress will have to pare back discretionary spending by several billion dollars. The cap on base defense spending will fall from $551.1 billion in fiscal 2017 to $549 billion in fiscal 2018. The cap on nondefense spending will fall from $518.5 billion to $515.4 billion, the Congressional Budget Office estimates.

Apart from waiving the Senate point of order, there are two ways to increase defense spending in the budget resolution above the caps.

One is to provide additional money through the Overseas Contingency Operations account, which is outside the constraints of the caps. Over the past three years, Republicans have written budget resolutions that complied with the caps but provided additional funding to the Pentagon through the war funds account.

In 2015, for example, the two chambers adopted a fiscal 2016 budget that added $38 billion to President Barack Obama’s request for $58 billion in war funds. The $96 billion in war funding represented a victory for defense hawks over fiscal conservatives who tried to limit or offset war funding in both chambers. Before the year was out, the Congress and Obama struck another budget deal to raise the caps after Democrats blocked appropriations bills in the Senate.

Besides using the OCO, the other option is for Democrats and Republicans to pass yet a third budget deal raising the caps, as they did in 2013 and 2015.

It’s also possible Republicans could forego a budget resolution. Lawmakers could deem an enforceable topline in the absence of a budget. Another scenario involves bringing appropriations bills to the floor after May 15 without either a budget or deeming resolution, which the House did for the first time last year.

The real problem with skipping a budget is that it eliminates the chance to use budget reconciliation to move a tax overhaul through the Senate with 51 votes. Republicans are counting on using the expedited process to pass a tax overhaul, which the GOP sees as the key to faster economic growth and job creation. Reconciliation cannot be used unless the two chambers adopt a budget resolution containing reconciliation instructions.

If worst comes to worst, the GOP might take a page from its own book and draw up another pared-down budget resolution, bereft of proposals and details. Republican leaders would describe it as a vehicle for a tax overhaul. They could say that Trump’s call to raise defense spending and scale back domestic programs would be addressed in a budget deal later in the year.

It’s even possible the House and Senate Budget committees would skip a budget resolution markup, as they did with the fiscal 2017 budget adopted in January. The House could take up a fiscal 2018 budget resolution without a markup, adopt it and send it to the Senate, where it too could be considered on the floor.