Happy Monday. Congress closed up shop early last week and remained closed today in observation of Yom Kippur, but the shutdown clock continues to tick ahead of a September 30 deadline. Here's what you need to know.
As McCarthy Scrambles, Trump Tells Republicans to ‘Shut It Down’
It’s not looking good for avoiding a shutdown. Congress doesn’t return to Washington until Tuesday evening, leaving precious little time to pass a short-term agreement to keep the federal government open when funding runs out in six days. And even if there were more time, far-right House Republicans confirmed over the weekend that they have no intention of backing down on their demands to slash spending starting on October 1 – and are willing to close the government if their demands are not met.
Deferring to the right wing, Speaker Kevin McCarthy has agreed to shift attention in the House this week away from a short-term funding bill known as a continuing resolution – a bill he cannot pass due to opposition from a handful of hardliners – to four of the 12 individual spending bills for the 2024 fiscal year. The idea is that making progress on four bills, covering Defense, Agriculture, Homeland Security and the State Department, could produce enough goodwill to convince renegade Republicans to change their minds.
But that probably won’t be enough to avoid a shutdown, since even that smaller group of four bills could be a challenge and there is no way for the House to pass the dozen 2024 spending bills before the shutdown deadline. Even if the House could pass the legislation with record speed, the bills would cut spending below levels agreed to in June in negotiations with the White House and the Senate – neither of which would agree to such cuts.
McCarthy ally Rep. Garrett Graves criticized fellow Republicans for pretending that the dozen appropriations bills offer a way to escape the shutdown threat. “Folks can go out there and create these imaginary solutions,” he said over the weekend. “Anyone who says that we’re going to finish all 12 appropriations bills between now and Saturday is absolutely hallucinating.”
Meanwhile, Majority Leader Chuck Schumer said he hopes to pass a continuing resolution in the Senate this week, but the process will take time and is not guaranteed to succeed. Even if Schumer can bring enough Republicans in the Senate on board – Sen. Rand Paul has vowed to delay any short-term funding bill that includes money for Ukraine – the continuing resolution would likely face opposition in the House.
All in all, it looks like Washington is cruising toward a shutdown.
A bipartisan workaround? One way a shutdown could be avoided would be for moderate Republicans to join with Democrats in the House to pass a continuing resolution written by the Senate. But with hardliners threatening to oust the speaker if he helps to pass a short-term funding bill that’s not to their liking, such a maneuver could cost McCarthy his job.
Rep. Tim Burchett, a Republican from Tennessee, told CNN’s Dana Bash this past weekend that he “would look strongly at” ousting McCarthy if he makes a deal with Democrats. Burchett also made it clear that he, like some of his colleagues, sees the conflict over spending levels in near-apocalyptic terms. “We are going to be governing over a pile of rubble if we’re not careful,” he said. “Our financial ship is sinking, and the American public needs to realize all these fancy titles — CRs and omnibus — to confuse the American public is not working.”
Another bipartisan option: Months ago, as part of their effort to avoid defaulting on U.S. obligations during the showdown over the debt ceiling, Democrats initiated what’s called a discharge petition, which would allow lawmakers to bring a bill to the floor of the House without the speaker’s approval. A discharge petition would usually take weeks to process, but with the head start provided by Democrats’ effort earlier this year, it could be ready to go as a funding bill in a week or two – not soon enough to prevent a shutdown altogether, but maybe in time to end one relatively quickly.
A handful of moderate Republicans have indicated that they would consider joining with Democrats to support a discharge petition. “It is absolutely an option,” Rep. Marc Molinar told reporters last week. Rep. Mike Lawler, another New York moderate, also said he would work with Democrats. “If there is not going to be a CR coming out of the House Republican caucus, then I will move forward with a discharge petition,” he said.
The discharge petition currently has 213 signatures, all Democrats, and would need 218 to advance. If it can reach that threshold with Republican help, it would then be available for a vote after nine legislative days.
Trump chimes in: Fueling the apocalyptic vibe on the far right, former president Donald Trump encouraged House Republicans to shut down the government if they don’t get everything they want. “It’s time Republicans learned how to fight!” he wrote on his social media platform. “Our Country is being systematically destroyed by the Radical Left Marxists, Fascists and Thugs - THE DEMOCRATS. UNLESS YOU GET EVERYTHING, SHUT IT DOWN!”
Trump’s words could help hardliners like Rep. Matt Gaetz of Florida maintain their unbending demands for spending cuts. “Trump Opposes the Continuing Resolution,” Gaetz said last week following a similar message from the former president and current GOP frontrunner for 2024. “Hold the Line.”
In response, McCarthy repeated his warning to Republicans about the cost of forcing a shutdown. “I think we’re much stronger when we stay open,” he said, per NBC News. Previously, he told Fox News that “A shutdown would only give strength to the Democrats. It would give the power to Biden. It wouldn’t pay our troops. It wouldn’t pay our border agents. More people would be coming across. I actually want to achieve something.”
Even so, the Republican hardliners say they think a shutdown is worth doing if it helps them reach their goals. “People in my district are willing to shut the government down for more conservative fiscal policy to put us on a path to balancing our budget at least in ten years,” Florida Rep. Greg Steube told Fox News.
The bottom line: Time is short, and a shutdown looks likely. But lawmakers do have an escape hatch or two they can use, which means a last-minute solution can’t be ruled out entirely.
Moody’s Warns on Shutdown Risk
Moody’s Investors Service warned Monday that a government shutdown would be seen negatively by the credit rating agency. Of the three major rating agencies, Moody’s is the only one that has maintained its top rating for U.S. debt.
“A shutdown would be credit negative for the US sovereign,” Moody's said in a statement. “In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability.”
Moody’s noted that a shutdown would not affect debt payments and is unlikely to cause long-term harm to the economy. Nevertheless, “it would underscore the weakness of US institutional and governance strength relative to other Aaa-rated sovereigns that we have highlighted in recent years.”
Chart of the Day
There have been more than 20 government shutdowns over the past 50 years, most lasting just a few days. As April Rubin explains at Axios, shutdowns have typically been driven by conflicts between Congress and the White House, including the longest one on record, which lasted 34 days during the Trump administration. Today the conflict falls along different lines. “In this case, it has to do more with dynamics within the House Republican caucus, with hardliners opposing spending agreements endorsed by their own leadership,” Rubin says.
Quote of the Day
“If the baseline requirement of a functional government is keeping the lights on, the US doesn’t have much of a government. With House Republicans unable to pass essential spending bills, yet another federal shutdown appears imminent. It would be the 21st funding lapse since the modern budget process was enacted.”
— The Bloomberg Opinion Editorial Board, writing on Monday. The board said it’s important to remember that shutdowns are harmful. “With hundreds of thousands of government workers likely to be furloughed — and their paychecks suspended — services for seniors and veterans could be impeded, payments to contractors and vendors deferred, parks and museums shut, health and safety inspections curtailed, scientific research halted, federal investigations tabled, key economic data releases postponed, loans to small businesses cut off, and more.”
And the threat of a shutdown remains a uniquely American political dynamic. “In no other country does the government routinely incapacitate itself for the sake of political stunts,” the board said. “This year’s shutdown, if indeed it comes, should be the last."
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Fiscal News Roundup
- McCarthy Confronts Key Decisions as Congress Hurtles Toward Government Shutdown – CNN
- Money for Ukraine at Center of Senate Bid to Avert Shutdown – New York Times
- Four Spending Bills Readied for House Floor Amid Stopgap Uncertainty – Roll Call
- Speaker McCarthy Is Giving Hard-Right Republicans What They Want. But It Never Seems to Be Enough – Associated Press
- Senate Democrats Put McCarthy in Shutdown Squeeze – The Hill
- Trump Breaks With McCarthy, Pushing Republicans to Shut Down the Government – NBC News
- US Risks Its Top Credit Rating With Shutdown, Moody's Warns – Bloomberg
- What’s Driving a Possible Shutdown? A Fraction of the Federal Budget – Washington Post
- Could a Discharge Petition Keep the Government Open? – Washington Post
- Biden Administration Announces $1.4 Billion to Improve Rail Safety and Boost Capacity in 35 States – Associated Press
- Free COVID Tests From Government Available Again – Axios
Views and Analysis
- The Wrecking-Ball Caucus: How the Far Right Brought Washington to Its Knees – Carl Hulse, New York Times
- Kevin McCarthy’s Catch-22 on the Shutdown – Rachel Base, Politico
- Another Government Shutdown Would Accomplish Nothing – Bloomberg Editorial Board
- Shutdowns Cost Billions as US Federal Workers Paid to Stay Home – Ari Nutter, Bloomberg
- America Pulled Children Out of Poverty. Now It’s Set to Reverse Course With a Vengeance – Nikhil Goyal, New York Times
- The Child Care ‘Cliff’ Is Upon Us. Look Out Below – Sarah Green Carmichael, Bloomberg
- For Manufacturers, Bidenomics Tops Maganomics Every Time – Karl W. Smith, Bloomberg
- The Open Plot to Dismantle the Federal Government – Russell Berman, The Atlantic
- Japan Shows How to Defeat Secular Stagnation – Matthew A. Winkler, Bloomberg
- Why America Has a Long-Term Labor Crisis, in Six Charts – Lauren Weber and Alana Pipe, Wall Street Journal