An incredibly busy news day! California’s longtime Democratic Sen. Dianne Feinstein died at age 90, a suspect was arrested in the 1996 murder of Tupac Shakur, record rain here in New York caused dangerous flooding and briefly allowed a sea lion to escape her zoo enclosure. Oh, and House Speaker Kevin McCarthy’s temporary spending bill failed to pass amid continued Republican infighting. We’re just over a day away from a likely government shutdown. Here’s the latest.
McCarthy’s Stopgap Plan Fails, All but Guaranteeing a Shutdown
House Speaker Kevin McCarthy’s partisan short-term spending bill failed Friday afternoon as 21 hard-right Republicans voted against their leader’s plan, delivering yet another resounding blow to the embattled speaker. With just over a day remaining before the government would be forced to shut down, Friday’s 232-198 vote leaves little hope to keep agencies open after midnight on Saturday — and leaves little room for McCarthy to try to lay blame for a shutdown on President Joe Biden or Democrats rather than on Republican dysfunction.
The speaker had rejected a bipartisan plan from the Senate and opted instead to try to pass a partisan stopgap that faced stiff opposition from some of his own members even though it was loaded up with Republican priorities. McCarthy, faced with the prospect that some of his members might seek his ouster, reportedly wanted to show his hard-right members that he did all he could to secure passage of their priorities.
The McCarthy plan would have kept the government running until the end of October, but it also called for a nearly 30% temporary cut to spending levels for discretionary programs outside of defense, Homeland Security, Veterans Affairs and disaster relief. It would also have set up a commission to address the deficit and explore changes to Social Security, Medicare and other entitlement programs.
Those measures failed to win over hardliners.
“This was a ‘no confidence’ vote,” Republican Rep. Ken Buck of Colorado, who opposed the House stopgap, told CNN afterwards.
McCarthy knew the plan would fail — and it also had no chance of passing the Senate or being signed by President Joe Biden. The White House had threatened to veto the House bill and criticized House Republicans for “playing partisan games” and reneging on a deal reached months ago.
“Extreme House Republicans are now tripling down on their demands to eviscerate programs millions of hardworking families count on—proposing a devastating 30% cut to law enforcement, Meals on Wheels, Head Start, and more,” White House Press Secretary Karine Jean-Pierre said in a statement. “They are breaking their word, abandoning the bipartisan deal that two-thirds of them voted for just four months ago, and marching our country toward an Extreme Republican Shutdown that will damage our economy and national security. The path forward to fund the government has been laid out by the Senate with bipartisan support—House Republicans just need to take it.”
House Republicans are not taking it. McCarthy signaled Friday morning he wasn’t about to cut a bipartisan deal. Asked about the prospect of working with Democrats, McCarthy bristled and labeled that “surrender.”
What’s next: The House is expected to hold additional votes on Saturday, but it’s not yet clear what they’ll consider. At a 4 p.m. closed-door meeting of the House Republican conference, McCarthy reportedly laid out the party’s options: They could pass the partisan bill, try a “clean” continuing resolution to extend current funding with added disaster relief and dare Democrats to vote against it, swallow the bipartisan Senate plan and its Ukraine funding or shut the government down. That last option appears most likely.
The House will likely continue to vote on annual appropriations bills — it passed three on Thursday night — but the process of reconciling the House spending plans with the Senate’s could also drag on for weeks.
The Senate, meanwhile, continues to work on its bipartisan plan, but procedural delays by Republican Sen. Rand Paul of Kentucky mean that legislation isn’t likely to be ready before the shutdown deadline and McCarthy isn’t likely to bring it to a vote.
Other options for resolving this showdown: The Senate plan may still be amended to include as much as $6 billion in border security funding, which might be enough to convince McCarthy to bring it to a vote, though doing so would probably trigger calls for his removal.
Moderate Republicans have also discussed signing onto a Democratic discharge petition to force a vote to reopen the government. None have done so yet, and the process would take nine days at minimum.
The bottom line: Barring some unexpected last-minute solution, the government will shut down Sunday at 12:01 a.m. ET. How long it stays shut down is now the big question. McCarthy could also still face a Republican attempt to remove him from the speaker’s job. October 13 — the next payday for federal workers and military members — may be the new deadline for a deal. “House Republicans are privately admitting that a government shutdown could last for at least two weeks, with pressure building to reopen before military service members are set to receive their next paychecks in mid-October,” The Washington Post’s Marianna Sotomayor reports.
Number of the Day: 3.5 Million
About 3.5 million federal workers will go without pay if the government shuts down this weekend, according to an estimate by the White House. More than half — about 2 million — will be affiliated with the military.
Of the roughly 1.5 million civilian federal employees, more than 800,000 will be furloughed. The rest will be required to continue working, but without regular pay.
Office of Management and Budget Director Shalanda Young highlighted some of the pain that a shutdown would cause at the White House press briefing Friday: “What would a shutdown mean? More than 2 million service members wouldn't get their paycheck. Long-term disaster recovery would be further delayed. Nutrition assistance for nearly 7 million women and children who rely on WIC would be jeopardized. Small businesses would lose out on more than $100 million a day in loans.”
Key Inflation Measure Registers Smallest Increase Since 2020
The core personal consumption expenditures price index — an influential measure of inflation that ignores volatile food and fuel prices — rose by just 0.1% in August, its smallest month-over-month increase since late 2020, the Bureau of Economic Analysis announced Friday.
On a 12-month basis, core PCE increased 3.9% in August, down from the revised 4.3% level recorded in July. On an annualized basis, core PCE rose 1.8% — falling below the key 2% level for the first time since 2020.
Former White House economist Jason Furman said we have now seen “three unambiguously good months in a row for core PCE.” Citing Furman’s data, which shows that core PCE inflation has averaged 2.2% over the last three months, University of Michigan economist Justin Wolfers said it looks like “the inflationary surge was transitory and has returned back to normal.”
Andrew Hunter, an economist at Capital Economics, said the report shows that the Fed has been too pessimistic in its outlook on inflation. “Barring a dramatic re-acceleration in that monthly pace, which is unlikely given the cooling labor market and the sharp downturn in housing inflation, we continue to expect core PCE inflation to fall well below the Fed’s 3.7% projection for the end of this year,” he said in a note.
Is the Fed done? Since core PCE is the Federal Reserve’s preferred measure of inflation, the latest reading boosts hopes that the Fed will hold steady on interest rates rather than raising them at the central bank’s next meeting in late October.
New York Fed President John Williams said Friday that while he thinks inflation is still too high, the Fed has probably raised rates high enough to produce its desired outcome. “My current assessment is that we are at, or near, the peak level of the target range for the federal funds rate,” he said in prepared remarks for an event in Long Island. “I expect we will need to maintain a restrictive stance of monetary policy for some time to fully restore balance to demand and supply and bring inflation back to our 2 percent longer-run goal.”
Fiscal News Roundup
- Government Barreling Toward Shutdown After McCarthy Dealt Another Defeat – CNN
- House GOP Looks Ahead to Plan B After Doomed Stopgap Vote – Roll Call
- House Republicans Privately Say at Least a 2-Week Shutdown Is Likely – Washington Post
- Democrats Challenge 'MIA' GOP Centrists to Team Up and Keep the Government Open – NBC News
- Some in Senate GOP Eye Cutting Ukraine Aid or Adding Border Funds to Spending Bill – Washington Post
- Senate Group Negotiating Border Adds Is Missing Something: Any Democratic Involvement – Politico
- More Than 800,000 Federal Civilian Employees Would Be Sent Home Without Pay During a Shutdown – Washington Post
- The IRS Thought It Was Shutdown-Proof. Now Most Staff Would Go Home – Washington Post
- Here’s Who Works and Who Is Furloughed During a Government Shutdown – Washington Post
- Here’s What Stops — And What Doesn’t — If the US Government Shuts Down – Bloomberg
- US Growth, Not Debt Rating, Will Be Hurt by a Shutdown, S&P Says – Bloomberg
- Dianne Feinstein, Centrist Stalwart of the Senate, Dies at 90 – Washington Post
Views and Analysis
- Republicans Reach a New Low With Shutdown Shenanigans – Jennifer Rubin, Washington Post
- It’s Outrageous That Congress Would Be Paid in a Shutdown While Most Federal Workers Wouldn’t – Rob Rosenthal, CNN
- A Government Shutdown Could Cost Billions. Here’s Why – Dan Rosenzweig-Ziff, Washington Post
- Gaetz’s Takedown Mission: ‘He Wants Kevin’ – Rachel Bade, Politico
- No Pay for Troops? Fine. But the Hunter Biden Probe? Essential! – Dana Milbank, Washington Post
- The Impending Government Shutdown Is Nothing but Theater – Brain Riedl, The Dispatch