Fiscal battles loom for new House Republican leaders

By David Lawder WASHINGTON (Reuters) - The Congress faces more big fights over funding for highway construction and government agencies in the coming months as newly elected Republican leaders in the House of Representatives work to soothe the concerns of the party's right flank. Representatives Kevin McCarthy, elected majority leader, and Steve Scalise, elected majority whip, will be under pressure to make good on promises to give rank-and-file Republicans more say over legislation they bring to the floor for votes. That is likely to mean a tougher negotiating line with Senate Democrats over spending issues, and bills that are more in line with conservative principles. "It opens the door for another fiscal standoff," said Chris Krueger, a former Republican House staffer now with Guggenheim Securities in Washington. "Ronald Reagan could be the whip and you're still going to have a hard time passing bills this summer." Conservatives have vented frustration with what they say has been a tendency by House Speaker John Boehner and outgoing Majority Leader Eric Cantor to craft legislation behind closed doors. They have also been angered by instances when leadership has brought bills to the floor without the support of a majority of Republicans and passed them largely with Democratic votes. A measure to provide relief for victims of Superstorm Sandy and a deal to end a government shutdown last October were two such instances. Boehner has struggled to tamp down rebellions from Tea Party conservatives, whose demands for smaller government have led to fights over shutdowns and potential debt defaults. Tea Party lawmakers will keep up the pressure on Boehner. Some said the election of Scalise, a conservative from Louisiana, would not be enough to meet their demands for greater representation in leadership. With the risk of possible challenges to leadership in a fresh vote after the November elections, Boehner, McCarthy and Scalise will have to work hard to keep their conservative wing satisfied if they want to remain in their jobs. The new leadership team immediately faces a series of upcoming legislative deadlines, including replenishment of the Highway Trust Fund, which will run out of money for new highway construction projects by late August. House Republicans have ruled out an increase in federal fuel taxes but have failed to agree on other ways to find the $19 billion needed to pay for highway projects over the next year. Proposals have included savings from ending Saturday U.S. mail deliveries and revenue gained by allowing companies to repatriate profits at a lower tax rate. Democrats have proposed closing some corporate tax breaks to raise highway funds, a move that has been resisted by both moderate and conservative Republicans. If a deal cannot be reached, delays for new projects could start by August and all federal highway funding could stop by Sept. 30 Congress also must resolve disputes over annual spending bills needed to keep government agencies open past the Sept. 30 fiscal year-end. Republican House-passed versions of some of these measures contain significant cuts to transportation grants and housing subsidies, which Senate Democrats want to reverse. A further tilt to the right would be "palpable" next year if Republicans win control of the Senate and increase their House majority, said Representative John Fleming, a Louisiana conservative. Another extension of the federal debt limit that is needed by March 31, 2015, would require cuts to benefit programs such as Medicare and Social Security, he said. "We're going to be sending the president legislation and putting it on his desk for signature that has the kind of reforms the American people demand," Fleming said. Immigration reform legislation is all but dead in the House. Tea Party candidate David Brat defeated Cantor, in part by attacking him for his openness to legal status for some children brought to the United States illegally by their parents. Brat's upset victory is likely to further spook Republicans who might be inclined to support immigration reform. Representative Chris Van Hollen, the top Democrat on the House Budget Committee, said he believed the Republican leadership reshuffle would add up to less compromise. "I fear that the situation in the House has grown even more difficult because the signal that was sent to the House Republican caucus by Congressman Eric Cantor’s defeat was, ‘Don’t even whisper about compromise on these big national issues,'" Van Hollen said. (Additional reporting by Emily Stephenson and Susan Cornwell; Editing by Caren Bohan and Ken Wills)