Congress Rushes to Avert a Shutdown as Conservatives Fume

Congress Rushes to Avert a Shutdown as Conservatives Fume

Senate Majority Leader Schumer
Sipa USA
By Yuval Rosenberg and Michael Rainey
Tuesday, January 16, 2024

Happy Tuesday! President Joe Biden will host House and Senate leaders at the White House tomorrow to discuss the stalled national security supplemental spending bill he has requested, with more than $100 billion he says is urgently needed to help Ukraine and Israel and secure the southern border.

Here’s what else is going on.

Congress Rushes to Avert a Shutdown as Conservatives Fume Over Plan

The Senate is set to kick off action shortly on a plan to stave off a government shutdown Friday night, extend funding for federal agencies and buy time for appropriators to write annual spending bills.

Senate Majority Leader Chuck Schumer and House Speaker Mike Johnson unveiled the plan on Sunday night following their agreement earlier this month to set discretionary spending for fiscal year 2024 at $1.66 trillion. As appropriators work to flesh out all the details of the spending plan, the “clean” stopgap bill Schumer and Johnson released on Sunday would continue federal funding into March, past looming January 19 and February 2 deadlines that could result in partial shutdowns. It would preserve the two-tiered structure chosen by Johnson, setting new deadlines for various departments on March 1 and March 8.

“The focus of this week will be to pass this extension as quickly as we can,” Schumer, a New York Democrat, said Tuesday afternoon on the Senate floor. “If both sides continue to work in good faith, I’m hopeful that we can wrap up work on the CR no later than Thursday. The key to finishing our work this week will be bipartisan cooperation in both chambers. We can’t pass these bills without support from Republicans and Democrats in both the House and the Senate.”

It’s not completely clear that lawmakers can steer clear of a brief shutdown, given that any senator can delay the bill and the House will still have to pass it after the Senate does. The House canceled other votes it had planned for Tuesday due to the snowstorm that hit D.C. But Johnson faces a far more treacherous storm within his own party as he relies on Democratic votes to avert a shutdown.

The speaker had portrayed the stopgap funding bill, which includes no policy changes, as necessary to be able to pass the 12 annual appropriations bills individually — a key demand of his right-wing members — and accomplish other Republican goals. “Because the completion deadlines are upon us, a short continuing resolution is required to complete what House Republicans are working hard to achieve: an end to governance by omnibus, meaningful policy wins, and better stewardship of American tax dollars,” he said in a statement over the holiday weekend.

House conservatives don’t see it that way. They have pressured Johnson to back out of the deal he made with Schumer and press for border policy changes and steeper spending cuts. On Sunday, they quickly slammed the stopgap bill. “The @HouseGOP is planning to pass a short-term spending bill continuing Pelosi levels with Biden policies, to buy time to pass longer-term spending bills at Pelosi levels with Biden policies,” the right-wing House Freedom Caucus posted on social media Sunday night. “This is what surrender looks like.”

With hardliners opposed to the stopgap, House passage of the bill will have to happen via a process requiring a two-thirds majority. Most of those votes will have to come from Democrats, though Johnson reportedly hopes to have the support of a majority of his 218 members.

The bottom line: This would be the third stopgap spending bill that Congress has passed since September. We should be on track to avoid any prolonged shutdown.

Lawmakers Announce $78 Billion Plan to Expand Child Tax Credit, Revive Business Tax Breaks

Congressional negotiators announced Tuesday that they have reached an agreement on a $78 billion legislative package that would revive tax breaks for business investment and expand the child tax credit over a three-year period. The cost of the new tax breaks would be offset by ending a troubled federal program that provides credits for businesses that kept employees on their payrolls during the Covid-19 pandemic.

The agreement was announced by House Ways and Means Committee Chairman Jason Smith and Senate Finance Committee Chairman Ron Wyden, who said the legislation, The Tax Relief for American Families and Workers Act of 2024, provides “a common sense, bipartisan, bicameral tax framework that promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses.”

The details: The proposal, which still needs to be turned into specific legislative language, would phase in an increase in the maximum refundable annual child tax credit, raising it from $1,600 to $2,000 over three years (2023, 2024 and 2025), with values adjusted for inflation starting this year. It would also allow households to use either this year’s or last year’s income when calculating credits, to maximize the benefit.

For businesses, the proposal would restore certain tax benefits that were taken away to help offset the cost of the 2017 tax cuts, including allowing firms to immediately deduct the cost of certain research and development investments, rather than spreading the cost out over five years, and restoring full expensing of the cost of equipment and vehicles. It would also address the housing shortage in the U.S. by expanding a tax credit that rewards developers for building rent-restricted units. And it would provide additional tax relief for households in disaster areas, as well as tax adjustments for firms that do business in Taiwan.

To offset the cost, the lawmakers propose to end the Employee Retention Credit at the end of January, rather than in 2025, saving more than $70 billion. The program has been marred by significant cost overruns and fraud.

Hoping for rapid action: The tax writers want the legislation to apply to the 2023 tax year, and with the tax season beginning on January 29, they will need to move quickly. The legislation’s fate in Congress, however, is far from clear.

The White House did not endorse the proposal on Tuesday, saying instead that President Joe Biden is committed to reviving the “full expanded Child Tax Credit” that he signed into law on a temporary basis in 2021 — a move that sharply reduced child poverty during the pandemic. At the same time, the White House said it appreciated the negotiators’ work and would review the details of the current agreement. Senate Majority Leader Chuck Schumer did back the plan, saying it would “significantly improve the lives of millions of working families and help mainstream businesses grow in today's economy.”

The U.S. Chamber of Commerce came out in favor of the proposal, citing its “pro-growth tax policies.” In a statement, chief policy officer Neil Bradley said, “With tax filing season about to begin, there is absolutely no time for delay in enacting this package.”

Child advocates also expressed support for the proposal. Wyden said it would help 15 million children in low-income families, with analysts at the liberal Center on Budget and Policy Priorities putting that number slightly higher: “While modest in size, the proposal would have a significant impact,” the analysts wrote. “In the first year, more than 80 percent of the roughly 19 million children under 17 in families with low incomes who don’t now get the full credit would benefit — about 16 million children. This includes nearly 3 million children under age 3.”

Washington Post columnist Catherine Rampell said the proposal has little downside. “Help kids, help companies and pay for it all by reducing tax fraud,” she wrote. “That’s the terrific win-win-win deal.” The fiscal hawks at the Committee for a Responsible Federal Budget, however, warned that the proposal could be costly if it were extended beyond three years. “We estimate the plan would cost more than half a trillion dollars over a decade if the policies were made permanent without further offsets,” the group said Tuesday.

Quote of the Day: The ‘Last Mile’ on Inflation

“[I]t is difficult to conclude that the last mile of disinflation is more arduous than the rest. In terms of policy, this implies that the Fed need not view the final phase of the disinflation process as fundamentally different from the other phases. Specifically, the Fed need not exert some sort of extraordinary effort to consistently bring inflation down the last few percentage points to reach its 2 percent target.”

— David Rapach, an economist at the Federal Reserve Bank of Atlanta, in a research paper released Tuesday. While some economists have argued that the Fed may face serious challenges bringing inflation all the way down to its target of 2%, Rapach finds that there is no reason to believe that the final stages of the battle against inflation are any different than the initial effort. Rapach warns that the danger more likely lies in maintaining tight monetary policy for too long, which “unnecessarily increases the risk of a ‘hard landing.’”

Send your feedback to And please encourage your friends to sign up here for their own copy of this newsletter.

Fiscal News Roundup

Views and Analysis