Policy snags hold up $1.1 trillion spending bill

WASHINGTON — Negotiators inched closer to agreement on a $1.1 trillion government-wide spending bill on Tuesday, as House Republicans indicated they would advance several controversial policy provisions on a separate track.

The massive measure is the main piece of unfinished business before the lame-duck Congress packs up for the holidays and Republicans take full control of Capitol Hill next month. GOP leaders want a clean slate to start next year and are eager for a deal. Democrats want a deal as well — while they retain power in the Senate.

Money issues and many policy provisions have been worked out. The remaining hang-up involved efforts by House Financial Services Chairman Jeb Hensarling, R-Texas, to erode provisions of the 2010 Dodd-Frank law that tightened regulation of the financial sector. House leaders signaled they would advance that legislation separately — tied to a renewal of the government’s terrorism insurance program that’s eagerly sought by Democrats standing in the way of Hensarling’s moves.

The power play by Speaker John Boehner, R-Ohio, is aimed at making the Senate fold, but Democrats controlling the chamber — for now — said they would reject the move, which would mean that the government’s terrorism insurance program would lapse at the end of the year.

The terrorism insurance program is crucially important to the construction and hospitality sectors, who say they will be unable to get insurance against costly attacks.

A key issue in the battle involves unrelated legislation that would exempt banks from having to “push out” much of their trading in complex and risky financial instruments known as swaps into affiliates that aren’t eligible for federal assistance such as deposit insurance. The measure comes in response to complaints from the banking industry, which says it would make customers pay more for products that help them hedge against market changes like higher fuel costs.

Democrats say the measure puts taxpayers at risk for future bailouts.

Aides said that efforts to attach to the broader bill politically tricky legislation to shore up economically distressed multiemployer pension plans by permitting a reduction of benefits for current retirees were likely to fail. The bipartisan measure may instead advance on a separate track.

But negotiators did reach agreement on the substance of the terrorism insurance program, which provides a backstop to the market for insurance against terrorist attacks, even though it may fail because of the Dodd-Frank fight. The compromise would extend the program for six years and double the level of damages at which the government would step in and cover most damages from a terror attack — from $100 million to $200 million.

The broader spending measure would fund the day-to-day operations of every federal agency, from the Pentagon to the Border Patrol to the agencies coordinating the government’s response to Ebola at home and abroad. Details were closely held but the parameters of the measure came into shape after lengthy negotiations last week and over the weekend.

Republicans targeted domestic agencies such as the IRS and the Environmental Protection Agency for cuts while Democrats sought to preserve Amtrak subsidies and Transportation Department “TIGER” grants to state and local governments for infrastructure projects.

Top leaders had hoped to unveil the spending measure by Monday evening in anticipation of a House vote Wednesday, but working out the measure’s many policy add-ons — called “riders” — proved too difficult for the top Democrats and Republicans in the House and Senate. Now, the hope is that the measure will be made public Tuesday.

Current funding expires at midnight Thursday, so a short-term funding bill is likely to be required to make sure there isn’t a government shutdown.

Also on the packed agenda for the week is a one-year renewal of a package of expired tax breaks for individuals and businesses; and a defense policy measure that renews the Pentagon’s authority to train Syrian rebels to battle Islamic State militants who control large swaths of Iraq and Syria.

President Barack Obama would receive more than $5 billion of his $6.2 billion request to combat Ebola at home and abroad, but aides said the measure is likely to undercut reforms to the school lunch program that are a top priority of first lady Michelle Obama by easing requirements for limiting salt and including more whole grains in lunches that are the main meal of the day for many poor children.

There’s more than $70 billion to conduct overseas anti-terror operations, including funds to fight Islamic State extremists and money for State Department diplomacy efforts. But the Pentagon’s core budget would be held flat at current levels of about $490 billion.

The bill freezes funding for core government accounts at slightly more than $1 trillion, but the total cost will approach $1.1 trillion after war funding and emergency money to fight Ebola is added in. Veterans’ health programs get increases, but large portions of the budget are mostly frozen in place.

The measure would also extend legislation that blocks state and local governments from taxing access to the Internet through Sept. 30.

The trucking industry appeared on track to win a provision blocking new “hours of service” rules requiring two nights of sleep before the clock would start on a new workweek.

ANDREW TAYLOR, Associated Press