President Vetoes National Defense Authorization Act: NASBP Legislation Still May Become Law 

The National Defense Authorization Act (NDAA) Conference Report for the 2016 NDAA included two provisions of importance to the surety industry: one addressing individual sureties and the second increasing the guarantee to sureties that participate in the Preferred Program of the U.S. Small Business Administration Surety Bond Guarantee Program from 70% to 90%. On October 22, as expected, the President vetoed the NDAA Conference Report because it included $38 billion in funding for defense spending for the Overseas Contingency Operations (OCO), which the President believes does not comply with sequestration rules established under the Budget Control Act of 2011.

According to the President, “I’m going to be vetoing this authorization bill; I’m going to be sending it back to Congress and my message to them is very simple: let’s do this right. We’re in the midst of budget discussions. Let’s have a budget that properly funds our national security as well as economic security; let’s make sure that we’re able in a constructive way to reform our military spending to make it sustainable over the long term.” Acknowledging his responsibility to keep the military properly funded, Obama said the bill “does a number of good things,” but “falls woefully short in key areas.” Chiefly, it keeps in place the sequester and “resorts to gimmicks that has not allowed the Pentagon to do what it needs to do,” he said.

Meanwhile, the U.S. House Armed Services Committee Chairman Mac Thornberry (R-TX-13th) received unanimous consent to hold a veto override vote in the House on November 5. The House passed the NDAA Conference Report 270-156, which is 20 votes short of overriding the President’s veto. U.S. Senate Armed Services Committee Chairman John McCain (R-AZ) and House Chairman Thornberry issued a joint editorial in the Wall Street Journal, opposing the President’s veto while raising specific points. “This bill authorizes every dollar of the $612 billion that President Obama requested for national defense. His objection is over an obscure mechanism using the Overseas Contingency Operations (OCO) account, to lift defense spending above the harmful caps imposed by the Budget Control Act (BCA) of 2011. If there is more money for U.S. troops, he demands more money for the Environmental Protection Agency. It’s that simple.” McCain and Thornberry added, “In vetoing this bill, the president imposes more harm and uncertainty on the military at a time when America faces dangerous and complex threats from around the world.”

There have been only four times in our nation’s history where the President has vetoed the NDAA. On those four occasions, agreement was reached by amending only that particular provision/section of the NDAA Conference Report. However, the circumstances surrounding this NDAA are different. The President’s objection is the use of the OCO to bypass the sequester, which is integral to the underpinnings of the current legislation. The simplest solution would be to raise the sequester caps of the BCA, which was recently accomplished under the Bipartisan Budget Act of 2013 brokered by Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI-1st). Given the pressure that Representative Ryan may face from the members of the Republican Freedom Caucus who are fiscal conservatives, this may not be an option.

NASBP continues to monitor this extremely fluid situation. Even the most experienced Capitol Hill staffers are uncertain what the final outcome might be. NASBP remains hopeful that a deal can be reached and our surety provisions will remain intact as adopted in the final NDAA Conference Report.

House Highway Transportation Bill

The U.S. House of Representative’s Transportation and Infrastructure (T&I) Committee marked up and approved the Surface Transportation Reauthorization and Reform Act of 2015, H.R. 3763, a six-year, $325 billion surface transportation reauthorization bill. H.R. 3763 authorizes $261 billion to highways, $55 billion to transit and approximately $9 billion to safety programs from fiscal years 2016 through 2021. In addition to authorizing general highway spending for six years, the bill aims to improve the nation’s infrastructure by providing fiscal certainty to state and local governments. The Chairman of the House T&I Committee, Bill Shuster (R-PA-9th), expects the bill to be on the floor within the next week or so. In the meantime, Congress will need to pass a short-term extension of the current highway authorization, which expires on October 29. The Senate passed a three-year highway funding bill in July. Senator Jim Inhofe (R-OK), Chairman of the Senate Environment and Public Works Committee, said in a statement after the House panel’s vote, “With this milestone, Congress should be able to send a bill to the President’s desk by Thanksgiving.”

For more information, contact NASBP Director of Government Relations Larry LeClair at lleclair@nasbp.org.