Shutdown Averted, but More Showdowns Ahead

By Yuval Rosenberg

Friday at last! Congress made a deal
to avoid a shutdown and the unemployment rate dropped sharply, so
all in all not such a bad week. Here’s what you need to know.

Biden Signs Bill to Avert Shutdown — but
More Showdowns Lay Ahead

President Biden on Friday signed a stopgap bill to fund
the government through February 18, averting a government shutdown
and pushing congressional budget fights into next year.

The short-term funding bill, known as a continuing
resolution, cleared the House in a largely party-line vote on
Thursday afternoon. “Only one Republican, Rep. Adam Kinzinger
(Ill.), voted Thursday to keep the government open even though the
stopgap funding resolution kept in place the funding levels enacted
under President Donald Trump,” The Washington Post’s Mike DeBonis

pointed out.

The bill passed the Senate hours later, after some
conservatives — most notably Roger Marshall of Kansas, Ted Cruz of
Texas and Mike Lee of Utah — had threatened to delay the
legislation and allow a short shutdown over objections to Biden’s
vaccine and testing mandate for large private employers. That
mandate is currently held up in court. “I don’t want to shut down
the government,” Lee said. “The only thing I want to shut down is
Congress funding enforcement of an immoral, unconstitutional
vaccine mandate.”

The Senate standoff was resolved when Senate Majority
Leader Chuck Schumer (D-NY) agreed to conservatives’ demands to
allow a simple majority vote on an amendment defunding Biden’s
vaccine mandate. That vote failed, 48-50, clearing the path for the
Senate to pass the continuing resolution by a 69-28
margin.

What the stopgap bill does: The
legislation will keep the lights on at federal departments and
agencies for another 11 weeks and provides an additional $7 billion
to help Afghan refugees. It also authorizes $1.6 billion to fund
care for unaccompanied child migrants. “The bill, however, doesn’t
address an array of unresolved policy issues and program funding
that lawmakers had hoped to tackle before the end of the year,
including impending cuts to Medicare and farm subsidies,” The
Washington Post’s Mariana Alfaro and Tyler Pager
noted.

What’s next: “Funding the government
isn’t a great achievement. It’s a bare minimum of what we need to
get done,” Biden told reporters Friday morning. The president
thanked lawmakers for passing the bill in bipartisan fashion and
urged them to use the time the legislation provides to finish the
long-stalled funding for the full fiscal year, which started in
October.

Republicans and Democrats have made little progress on
setting full-year funding levels, as GOP lawmakers see little
incentive to approve money to further Biden’s agenda. A full-year
continuing resolution, on the other hand, would extend federal
funding at levels set under former President Trump. “Both parties
say the skirmish over the short-term funding fix was far simpler
than the brutal fight they predict over Congress’ full-year
spending,” Politico
reports. If the two sides can’t complete the
contentious annual appropriations bills, they would need to pass
another short-term funding patch to avoid a shutdown.

Sen. Richard Shelby of Alabama, the top Republican on the
Senate Appropriations Committee, said in a statement that it was
time to “get serious” about completing the annual funding bills. “I
have said many times that work can only begin if we agree to start
FY22 where we finished FY21,” he said. “That means maintaining
legacy riders, eliminating poison pills, and getting serious about
the funding we are going to provide for our nation’s defense. If
that doesn’t happen, we’ll be having this same conversation in
February.”

Why it matters: “For many lawmakers,
the entire saga only served to highlight the extent of the
political acrimony on Capitol Hill, where even the most basic
responsibilities of governance quickly devolve into partisan
showdowns,” the Post’s Tony Romm and Mike DeBonis
write. “And it underscored the extent to which
conservatives in Congress see the president’s stance on vaccines as
a vector to mount prominent political attacks, a campaign that
Republicans have pledged to continue in the days ahead.”

The flirtation with shutdowns may continue as well. The
latest gambit by conservatives “showed just how single-minded
Republicans are about appealing to their base right now — and
portends even more hazardous shutdown fights in the near future,”

writes the Post’s Aaron Blake. “The continued use
of such tactics in the absence of success or even political gain
also suggests we’ll only see more of this.”

The bottom line: The budget and
appropriations battles will continue into February, and perhaps
beyond. In the meantime, though, Congress also has to prevent a
debt default and approve an annual defense bill while Democrats
also look to pass their $1.75 trillion Build Back Better
Act.

Quote of the Day: Another Warning on the Debt
Ceiling

“Those who believe the debt limit can safely be pushed to the
back of the December legislative pileup are misinformed. Congress
would be flirting with financial disaster if it leaves for the
holiday recess without addressing the debt limit.”

— Shai Akabas, director of economic policy at the Bipartisan
Policy Center, which this week updated its estimate for arrival of
the “X Date” – the day on which the U.S Treasury will be unable to
meet all of its financial obligations. BPC now says that the X Date
will most likely occur between December 21, 2021, and January 28,
2022, with a greater likelihood in the earlier part of the range
due to uncertainty over tax revenue flows amid the ongoing Covid-19
crisis.

The update underlines the analysis delivered by the
Congressional Budget Office earlier this week that supported
Treasury Secretary Janey Yellen’s conclusion that the debt ceiling
needs to be raised by December 15 in order to avoid a potential
default. “I cannot overstate how critical it is that Congress
address this issue,” Yellen told lawmakers this week. “America must
pay its bills on time and in full. If we do not, we will eviscerate
our current recovery.”

Reflecting on the difficulty Congress is having raising the debt
limit in a timely manner and the rapidly rising risk of default,
Akabas said, “It never ceases to amaze that the largest economy in
the world routinely comes within days of potentially missing
payments to its citizens, businesses, and creditors.”

Mixed Signals as Unemployment Rate
Drops

U.S. employers added a disappointing 210,000 jobs in
November, the Labor Department announced Friday, falling
well short of expectations for 500,000 or more new hires. At the
same time, the unemployment rate fell to a 21-month low of 4.2%,
even as more workers returned to the labor market, a positive sign
for the strength of the jobs recovery.

Economists emphasized that the hiring numbers and the
unemployment rate come from two different surveys, the first
focused on businesses and the second on households. The large
divergence between the two last month suggests that one of them is
missing out on some key data, which should be corrected in future
revisions – quite likely to the upside for the job numbers.

“The odds are good that the November total is being
underreported — as happened nearly every other month this year,”

says The Washington Post’s Phillip Bump, who notes
that 2021 has seen an unusual number of large upward revisions,
with the economy adding nearly 1 million more jobs this year than
initially reported.

Biden talks up report: Not surprisingly, the White House
is emphasizing the good news in the unemployment rate, which fell
four-tenths of a percentage point from the month before, and
skipped over the raw job numbers.

“Today we got the incredible news that our unemployment rate has
fallen to 4.2%,” President Joe Biden said Friday. “At this point in
the year, we’re looking at the sharpest one-year decline in
unemployment ever. Simply put, American is back to work and our
jobs recovery is going very strong.”

Many analysts agree with the upbeat assessment, saying that the
payroll numbers tend to be noisy. “Don't be fooled by the measly
payroll jobs gain this month because the economy's engines are
actually in overdrive as shown by the plunge in joblessness,"
Christopher Rupkey, chief economist at FWDBONDS, told Reuters.

Still, the labor market has a long way to go until it recovers
all of its pandemic losses, and that could be a problem for Biden
and for Democrats as they head into an election year. According to
economists Jason Furman and Wilson Powell III, the U.S. economy is
still 5 million jobs shy of the pre-pandemic trend – and the
Omicron variant of Covid-19 could make it even harder to close that
gap.

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