If it’s September in Washington, that means the leaves are losing their shine and the late-summer air is crisp with fears of a fall federal government shutdown.
It becomes the talk of the town nearly every autumn in the final month of budget deliberations between Congress’s six-week summer recess and before the new fiscal year begins on Oct. 1.
Sure enough, this year is no different, with House conservatives vowing to reject all 12 appropriations measures that constitute the federal government’s annual budget—including the nation’s “must-pass” defense bill—without top-line spending caps, cuts in discretionary allocations, and boosts in border security.
Many of the same GOP fiscal hardliners—most from the 40-member House Freedom Caucus—are also opposed to an interim 31-day continuing resolution (CR) that would fund the government through October adopted by the House Rules Committee in a partisan 9-3 vote after a near four-hour Sept. 18 hearing.
If approved by the House in the scheduled Sept. 20 floor vote—dubious; and endorsed by the Senate—very doubtful; the interim funding measure would be the 48th CR cobbled together to temporarily fund the federal government during budget impasses since 2010.
If the CR is shot down in the House and the chambers cannot come to an accord over the annual budget by Sept. 30, the nation could face its 11th federal government shutdown since 1980.
‘Unsustainable Trajectory’
The CR, cobbled together by three members of the Freedom Caucus and three Republican Main Street representatives, is accompanied by The Continuing Appropriations and Border Security Enhancement Act (2024), which increases funding for border and immigration enforcement while limiting asylum provisions.The CR targets two pressing issues not being addressed by the Biden administration and the Democrat-controlled Senate, House Rules Committee Chair Rep. Tom Cole said during the hearing.
“The United States faces many challenges today. The uncontrolled state of our southern border is certainly one of them. President Biden's self-inflicted border crisis continues to wreak havoc across the country,” he said. “Another is the stark fiscal reality we face.”
Mr. Cole said the federal government has accrued more than $33 trillion in debt across “years of chronic overspending, particularly including the outrageous spending spree President Biden and congressional Democrats went on in 2021 and 2022.”
This “unsustainable trajectory” must be halted, he said, and the CR is the first step in doing so.
“Our balance sheet needs to be addressed,” Mr. Cole said. “The approaching deadline to pass funding bills to keep the government open and operating after Sept. 30, just 12 days from today, reiterates the work that needs to be done. Congress can and must address the immediate problem before us. We have two weeks to avoid a shutdown.”
Rules Committee Democrats called the CR spending cuts “draconian” and the entire debate a waste of time since none of it will fly in the Democrat-controlled Senate.
“We have two weeks left before a government shutdown. A shutdown would hurt our nation's seniors, would hurt our veterans, our families, and children. It would hurt our workers. It would hurt all of our people,” Rep. Jim McGovern (D-Mass.) said. “But instead of dealing with that, Republicans are stalling for time while trying to get their act together.”
Panel Green Light Doesn’t Mean Adoption
Before the panel passed the CR and border security bill, mostly built from House Bill 2 (HB 2), House Speaker Rep. Kevin McCarthy (R-Calif.) told reporters that, despite discord within his conference, he was confident the budget will be adopted if not by Sept. 30, then by Oct. 31 with the extra month accorded under the CR.“I’ve told all Congress, you're not going to go home” until the budget is adopted, he said. “We're going to continue to work through this. I'm not giving up on the American people. You know, things that are tough sometimes are worth it. This country is worth it.”
However, while the CR has moved to the floor with all Republicans on the panel preliminarily endorsing it, there’s little assurance it is going to be adopted. At least 17 Republicans had confirmed by late afternoon on Sept. 18 they oppose the CR because it doesn’t cut spending enough.
With a 222-212 House majority, and all Democrats certain to vote against a CR that includes dozens of “culture war amendments,” defunds all allocations related to Ukraine, and imposes significant cuts across social spending programs, it would only take four Republicans to vote “no” for the proposed CR to fail.
The proposed CR keeps the Department of Defense (DOD) and Veterans Affairs funded at FY23 levels while imposing an 8-percent, or $1.59 trillion, cut in discretionary spending in 10 of the 12 appropriations bills.
But some House Freedom Caucus members and fiscal hawks in the chamber are demanding top-line spending be further scaled down to $1.471 trillion.
House Freedom Caucus member and Rule Committee panelist Rep. Ralph Norman (R-S.C.) said he would not vote for a CR that doesn’t trim spending to $1.471 billion but voted for the measure on Sept. 18 to move it to the floor, expressing confidence that Republicans “will come up with a solution. I feel good about a meeting of the minds” in the coming days.
The House CR adopted by the Rules Committee also does not include any money for Ukraine, which is certain to stymie its advance in the Democrat-led Senate. President Joe Biden has asked Congress for $24 billion in Ukraine support, including $13.1 billion in additional military aid and $8.5 billion for humanitarian assistance.
Shutdowns: A Brief Recent History
If the CR is adopted by both chambers, unlikely in its present form, it would be the 48th CR, ranging from one day to six months, used by Congress to temporarily fund the federal government since 2010, according to the Government Accountability Office (GAO).
If the House GOP cannot find CR consensus, or if the chambers cannot agree on the 12 appropriations bills before Sept. 30, then under the 1884 Anti-Deficiency Act, federal agencies cannot spend money and are, therefore, effectively de-funded beginning Oct. 1.
Similar budget impasses have fostered government shutdowns at least 10 times since 1980. They have been getting longer since 1995.
Between 1980-86, there were seven government shutdowns. Four only lasted one day; none more than five.
Since 1995, however, three government shutdowns have lasted much longer—1995-96 standoffs between President Bill Clinton and the Republican House lasted 21 and five days; an October 2013 stalemate over the Affordable Care Act extended 16 days; and a December 2018-January 2019 shutdown over border wall funding spanned five weeks.
Typically, during federal shutdowns, federal employees classified as "non-essential" are furloughed with the exception of the military, law enforcement agencies, and “essential” activities such as air traffic control. Services like mail delivery, tax collection, and debt payments also continue.
Social Security and Medicare payments and other social service entitlements are exempted because they are authorized by Congress in appropriations not included in annual budget approvals, although some Social Security offices may be closed or undermanned during a shutdown.
A shutdown will foster delays in processing applications for passports, small business loans, and government benefits while closing national parks, forests, and wildlife management areas just as hunting season is set to enter fall peaks across much of the country.
Under the plan, for instance, the U.S. Securities & Exchange Commission warns “non-essential” employees that they “may not volunteer to work without pay. Such voluntary services are a violation of the Anti-Deficiency Act and will not be permitted under any circumstances.”
Under guidelines posted with the OMB, the Centers for Disease Control (CDC) will keep 46 percent, or 6,448, of its employees on the job, including 2,518 who are “exempt” because their salaries are paid outside the federal appropriation process, and 3,930 who are deemed “essential.”
If several of the 12 federal appropriations bills have been adopted when a shutdown occurs, funding for those programs can be implemented. The 35-day 2018-19 budget impasse was a partial shutdown because it unfolded with five appropriations components already passed.
Those agencies that haven’t spent FY23 appropriated monies, or have fee income that can keep them operating, can stay open. Among them is the federal court system.
Economic Impact Limited
During the 2018-19 shutdown, of the nation’s 2.9 million federal employees, more than 380,000 were furloughed, and another 420,000 reported to work but went unpaid. Furloughed workers go without paychecks during the shutdown but receive backpay, which is not so with most others.
Past shutdowns have had little impact on the economy, according to a U.S. Bank Asset Management Group analysis of corporations’ Standard & Poor’s 500 performances during previous impasses.
During the 21-day 1995, 16-day 2012, and 35-day 2018-19 shutdowns “markets managed positive performance during the period of the shutdown,” U.S. Bank Asset Management Group states.
In the 1995 and 2013 shutdowns, “markets performed positively in the months leading up to a shutdown. In 2018, markets were down prior to the shutdown, but other contributing factors may have been at play, including the Federal Reserve’s decision to hike short-term interest rates during that period,” the analysis states, noting that on Aug. 1, Fitch Ratings downgraded its Long-Term Foreign-Currency Issuer Default Rating for the United States from AAA rating to AA+ after a series of Fed rate hikes.
The downgrading and what the world sees as a very public demonstration of dysfunction may not easily translate into quantifiable cause-and-effect data regarding shutdown impacts on the economy but the cycle of discord can take its toll on investor confidence, the analysis states.
In its downgrading, Fitch assessed that “repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”
