The most recent government shutdown lasted for 35 days in late December 2018 through late January 2019. (ddp)

Government Shutdown Looms. Congress has 22 days to pass 12 bills to fund federal government operations for fiscal year 2024, which begins on October 1. Since Congress won't be able to do this on time, it will need to pass a short-term extension (perhaps until the end of November or start of December) to avert a government shutdown. The extension would continue to fund government at current levels and give lawmakers more time to negotiate a broader, bipartisan deal. While there is generally agreement in Congress on the need to do this, there is opposition to this approach from some influential Republicans in the House. This will cause challenges in the House, but we nonetheless believe a short-term extension will ultimately be enacted before October 1. This will punt the bigger fight over government spending to later this year.

Financial markets likely will yawn over this development and resume watching this shutdown threat later this year.

The Opposition. The House Republicans Freedom Caucus, consisting of a few dozen House Republicans, opposes a short-term extension of government funding. The caucus has indicated that it wouldn't support an extension unless it addresses border enforcement and immigration reforms (including further construction of the border wall), the de-weaponization of the Justice Department and revocation of certain woke policies at the Defense Department. Not surprisingly, these provisions are non-starters for Democrats. Particularly in a divided Congress where Republicans have control of the House and Democrats of the Senate, government funding bills need to be bipartisan. Given that most Freedom Caucus members are likely to vote against the short-term funding bill, House Speaker Kevin McCarthy (R-CA) will need to pass the bill with Democratic support. This dynamic will put him on the hot seat with his party s most conservative members.

This will again raise the specter of his possible replacement as Speaker and trigger a new round of media stories about his precarious position, but unless a viable alternative emerges, his Speakership is likely still safe.

Pressure to Spend More. As we have noted before, the ultimate approval of a new round of government spending could be complicated by the potential imposition of automatic cuts in spending (defense and non-defense) if no final deal on spending has been passed by January 1. Those automatic cuts, which wouldn’t go into effect until April 30, are mandated by the bipartisan debt ceiling agreement struck in June. However, President Biden has asked Congress to provide a total of $53 billion of “supplemental” funding to any short-term extension bill. New assistance for Ukraine ($24 billion) and for natural disaster victims in Maui (HI), Florida are the largest items. However, the President also has requested new funding for the Postal Service Health Benefits program, measures to verify eligibility for the Medicaid and Medicare programs, and higher travel costs for employees at the Federal Aviation Administration. If not offset by corresponding spending reductions, the additional funding for these needs would seem to fly in the face of the spirit of the two-year spending caps and other deficit reduction measures in the debt ceiling resolution in June. It begs the question of whether the President and lawmakers are serious about deficit reduction or are the extra spending needs so vital they should be approved without being paid for?

This subject will be an important part of the conversation as the spending bills are considered.

The Final Word

Debatable Impact. Former President Trump didn't attend the August 23 Republican presidential debate, but, in many ways, the debate was all about him. One of the leading narratives preceding the debate was that it could offer an opportunity for Florida Governor Ron DeSantis to break away from other candidates and gain ground on Trump. That didn't happen. Another was that it could give another candidate an opportunity to position himself or herself as the primary alternative to Trump. That didn't happen. Another narrative was that attacks on Trump, particularly from former New Jersey Governor Chris Christie, could diminish Trump s standing with Republican voters. That didn't happen.

The debate's winner was Trump, since the event attracted only a small number of viewers (half of the number from the party s 2015 debates) and no other candidate made any significant ground on the former president.

For much more, see the latest edition of Washington Weekly or visit the homepage.

Approval Date: 9/8/2023

Expiration: 9/30/2024

Review Code: IS2305385