The possibility of a government shutdown is looming large, after Republican leadership scrapped a procedural vote on a stopgap funding bill to keep the government running through October. Intraparty feuding between moderates and the hard-right lies at the heart of the GOP’s inability to reach a compromise and highlights the challenge before House Speaker Kevin McCarthy (R-Calif.).
Both factions largely agree that federal spending should be reduced. But at least a dozen hard-right lawmakers have stymied efforts to pass a 30-day funding bill, angry over what they say is a lack of information on top-line budget numbers and assurances that the Senate will adhere to their fiscal demands.
The temporary stopgap bill proposed Sunday would have triggered a 1% cut to current fiscal levels but kept the government funded until Oct. 31. Even if the measure had made it out of the House, it was expected to be rejected in the Democratic-controlled Senate.
What is a government shutdown?
The government is typically funded through 12 annual appropriations bills, each of which covers different agencies or groups of agencies. In recent years, some or all of these 12 bills have been rolled into a single “omnibus” package and approved together.
The current spending laws expire on Sept. 30, the end of the government’s fiscal year. Any part of the government funded by appropriations bills that haven’t passed and been signed into law by midnight on Oct. 1, the start of the next fiscal year, could shut down. A partial shutdown would happen if some of these bills are enacted, but not all.
During a shutdown, the government mostly can’t spend money, meaning hundreds of thousands of federal workers don’t receive a timely paycheck, facilities such as national parks are closed and food stamp payments go unfulfilled.
But unlike a government default, U.S. bond payments aren’t at risk – those payments aren’t funded through annual appropriations, so they continue despite the shutdown.
McCarthy had promised conservatives that, in return for their support for his bid to become speaker, the House would handle each bill on its own. By Wednesday, it had only passed one of the 12, covering military construction and veterans affairs. The Senate had yet to pass any, though lawmakers there disagree less about how much to spend.
When is the government shutdown deadline?
Congress and the Biden administration have until Sept. 30, when the federal fiscal year ends, to reach an agreement on next year’s budget and prevent a shutdown. The 2024 fiscal year begins Oct. 1.
What are the main disagreements?
The core issue is how much money the government should spend next year. Some hard-right Republicans support lowering the top-line budget to about $1.4 trillion, which is below the $1.6 trillion agreed upon by McCarthy and President Biden earlier this year. But some moderates have said they have no incentive to cut spending further.
Democrats have ridiculed the idea they should vote for a lower spending number than what McCarthy and Biden agreed to in May. Bobby Kogan, senior director of federal budget policy at the left-leaning Center for American Progress, said over the summer that the GOP appeared to be trying to force Democrats to make concessions on other matters in exchange for sticking to the original spending agreement.
“I just go back to when I was growing up. I learned that once you make an agreement, you don’t renege on it. You stick with it,” Rep. Brendan F. Boyle (Pa.), the top Democrat on the Budget Committee, said Wednesday. “We reached an honorable, fair agreement that passed by an overwhelming number despite all of the critics saying it was impossible. It is time for us to get back to that agreement. It is time for all of us to honor our commitments and make sure that this country does not enforce a government shutdown on the American people.”
The stopgap measure, introduced by McCarthy, would cut overall federal spending by 1 percent, but exempts certain categories from reductions like the military and immigration enforcement. The White House said that would mean 8 percent cuts in many programs, leading to sharp reductions in money for nutritional assistance, teachers and education aid. The administration views that proposal as a nonstarter even if it did pass the House.
The stopgap bill from Sunday also did not include Biden’s request for Congress to approve a $20.6 billion aid package for Ukraine and billions more in disaster relief.
“There’s no money in the House right now for Ukraine. It’s not there,” Rep. Byron Donalds (R-Fla.), a key negotiator from the hard line House Freedom Caucus, said Tuesday.
Democratic and Republican Senate leaders have said they would tack money for those matters onto any short-term funding bill, The Washington Post reported.
“A good portion of the money allocated for Ukraine is being spent in this country to rebuild our industrial base,” Senate Republican Leader Mitch McConnell said Tuesday. “These people in Ukraine who are fighting for their independence are taking on one of the two big adversaries we have, Russia and China.”
What are Republicans proposing to avert a potential shutdown?
Some GOP lawmakers are considering getting behind a shell bill that could serve as the vehicle that allows moderates to supersede McCarthy’s control of the House floor and force a vote to keep the government open, three people familiar with the plan told The Post. While the details remain unknown, it is likely to include a short-term funding plan to prevent a shutdown that could garner enough support from House Democrats and the Senate.
Another deal could be struck between the Republican Governance Group and the New Democrat Coalition in the House, lawmakers familiar with the matter said, though a compromise with Democrats would be a last-case scenario for Republicans.
Who would be affected by a government shutdown?
Government shutdowns affect most federal workers. Hundreds of thousands of them could be sent home unpaid while the government is shut down, while federal employees whose work is deemed “essential” – such as those whose jobs concern public safety – are expected to continue to work unpaid. (Once the shutdown ends, workers are typically compensated in full for their missed paychecks.)
U.S. Postal Service operations will continue because the mail agency is largely self-funded through the sale of postage products. Social Security recipients will continue to receive payments, which aren’t funded through annual appropriations, but the Social Security Administration will not issue Social Security cards until a shutdown ends.
Other impacts can include recipients missing food stamp payments and disruptions to environmental and food inspections. If it continues long enough, a shutdown could also affect the broader economy.
Wall Street investors tend to shrug off government shutdowns, said Sam Stovall, chief investment strategist at CFRA Research, because they’ve been so short-lived. In the 20 shutdowns since 1976, stock prices have barely budged, down an average of 0.4 percent the week prior, up 0.1 percent the day of and up 0.1 percent during the entire shutdown period, according to CFRA.
But there can be stronger effects on the wider economy. Missed paychecks for government workers can dent consumer spending, which has remained strong since the immediate shock of the covid pandemic, said Dan Ives, managing director at Wedbush Securities.
“If a shutdown actually happens,” Ives said, “it takes up GDP every day it goes on.”
When was the last government shutdown?
The most recent government shutdown started in December 2018 during a dispute between President Donald Trump and House Democrats over the proposed U.S.-Mexico border wall. It lasted 34 days, which made it the longest shutdown in U.S. history.
The shutdown ended when delays hit major East Coast airports as unpaid air traffic controllers did not report to work.
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