Potential for Government Shutdown Increases: How We Got Here & What You Should Know
With less than one week until the end of Fiscal Year (FY) 2023, lawmakers face the daunting task of passing a Continuing Resolution (CR) to fund the federal government temporarily into FY 2024 until a full budget can be negotiated, voted on, and signed by the President. With the October 1 deadline fast approaching, turmoil within the House Republican Caucus has led to many observers to express concern over the potential of a government shutdown. The White House Office of Management & Budget began its standard, mandatory practice of providing shutdown guidance to federal agencies on Friday, September 22; one week before the September 30 funding deadline.
How We Got Here
For weeks now, the House of Representatives – historically the faster chamber in the appropriations process – has been stymied by infighting within the Republican Caucus. Speaker McCarthy has now failed twice to cobble together enough votes to pass a short-term spending bill with his slim majority in the House. House Democrats have taken this opportunity to urge a bipartisan solution, while Senate Majority Leader Chuck Schumer (D-NY) has floated the possibility of a Senate-led, bipartisan bill. That bill could be unveiled as early as Tuesday, September 26.
McCarthy continues to explore additional options while negotiating with GOP holdouts. One of the latest ideas is to focus on passing each individual bill out of the House – a tactic that Rep. Gaetz has vowed to be his final straw in seeking McCarthy’s ouster as Speaker. This week, House Republicans are moving forward on four appropriations bills (Agriculture, State Department, Defense, and Homeland Security); they are also contemplating a CR that could range from 14 to 60 days. Again, it’s unsure if McCarthy and his allies can secure the votes to pass these bills. Another consideration from other conservatives across the Capitol has been a vote on legislation that would automatically impose stopgap spending measures to permanently prevent shutdowns in the future.
Under the latest CR consideration, the revised stopgap would temporarily cut domestic spending by 27% - compared to the 8% in cuts proposed in the initial CR proposed by Speaker McCarthy. This legislation would also include an immigration and border security bill, as well as set up a House commission to study entitlement cuts and address the nation’s debt.
One of the most intriguing dynamics of the ongoing budget talks is this threat posed by far-right House members to use an antiquated procedure to remove Speaker Kevin McCarthy (R-CA-20) from his position. This move, known as the "motion to vacate," has created an atmosphere of uncertainty in the Capitol. McCarthy, who secured the speakership after a challenging path that involved making agreements with far-right members of his Party, now faces a situation where even a single member can initiate a vote on his removal. This move is spearheaded by Representative Matt Gaetz (R-FL-01), who cited McCarthy's alleged non-compliance with certain agreements as grounds for his removal. Despite Gaetz's threats, there are doubts about whether he possesses the necessary support to succeed. McCarthy himself has downplayed the threat, urging Gaetz to "go ahead and do it."
Here is an excerpt from the New York Times that may shed light on the corner that Speaker McCarthy finds himself backed into:
At a closed-door meeting with Republicans in the basement of the Capitol on Wednesday night… Mr. Gaetz announced flatly that he had seven members who would oppose any plan to pass a stopgap measure to keep the government from shutting down on Oct. 1, no matter what spending or policy concessions Mr. McCarthy was willing to make to win them over. The proclamation did not go over well in the room, where even some members of the ultraconservative House Freedom Caucus grumbled in disapproval.
But after the meeting, Mr. McCarthy quietly approached Mr. Gaetz and asked him to share the list of names, which Mr. Gaetz happily turned over.
“They’re immovable,” Mr. Gaetz said with confidence. In fact, the list appeared to be growing.
What You Should Know
As the deadline for budget and appropriations negotiations draws near, the specter of a government shutdown grows more ominous. The potential consequences of a shutdown are far-reaching and can have a profound impact on various aspects of American life. The true impact of a shutdown is determined by its duration – according to the Congressional Budget Office, the five-week partial shutdown of 2018-19 was estimated to cost the U.S. economy roughly $3 billion even after the government reopened. Here’s a short, high-level overview of what is typically impacted by government shutdowns:
Border Operations: Senators from both sides of the aisle have voiced concerns that a government shutdown could disrupt US-Mexico border operations, exacerbating the challenges posed by an increase in migrant arrivals.
Broadband: With the Commerce Department working to deploy nearly $43 billion in federal funds for broadband expansion, a shutdown will directly hamper the National Telecommunications and Information Administration’s efforts to coordinate with states and review submitted plans for the Broadband Equity Access and Deployment Program. The agency’s much-anticipated national strategy on wireless spectrum - which could shape how the US approaches 5G and 6G technology deployments - could also be delayed from its end of 2023 anticipated publication.
Disaster Relief: House Republicans and Democrats are urging their colleagues to provide tax relief for Americans recovering from natural disasters such as hurricanes, wildfires, and the Ohio train derailment from earlier this year. A shutdown would obviously hinder these relief efforts.
Economic Impact: Shutdowns can have a detrimental impact on the economy, thanks to furloughs, delayed payments to government employees, and reduced consumer confidence. Financial markets can also be negatively affected. Goldman Sachs predicts a government shutdown would directly reduce economic growth by 0.15% for each week it lasts, increasing to 0.2% each week once private sector efforts were included. The Department of Commerce would cease reviews or issuances of Small Business Administration loans.
Energy Projects: Even with a lapse in funding, the Interior Department will retain discretion to issue permits for energy projects on federal lands and waters, provided user fees are attached; it would, however, paralyze the environmental analyses for energy projects and other infrastructure activities.
Environmental Protection: White House National Climate Adviser Ali Zaidi has warned that a shutdown would endanger efforts to protect people from lead and cancer-causing chemicals. Environmental initiatives and regulations would likely be put on hold.
Health: Drug price negotiations may be thrown into limbo as several rugmakers have an October 2 deadline to report pricing data to Medicare.
Microchip Manufacturing: As part of the CHIPS & Science Act’s $52.8 billion in subsidies to buildout our nation’s domestic microchip factories and research centers, Commerce Department staff has been working seven days a week to review the first tranche of applicants. These efforts will come to a grinding halt in a shutdown. It will also stop the agency’s progress in developing and deploying export controls for advanced technology to China, Russia, and other adversaries.
National Security: A government shutdown can affect national security, as funding for defense and military operations can be disrupted. Though a large extent of the military readiness apparatus is deemed essential and would remain on the job without pay, it’s important to note that nearly 60% of all federal workers are stationed in the Departments of Defense, Veterans Affairs, and Homeland Security. This can have serious implications for the safety and preparedness of the nation.
Social Safety Net: Food stamps and such would continue, though recipients may face significant delays. Similarly, social security checks would continue to be delivered and processed, but Medicare card replacement or benefits verification would cease. Nearly all Department of Housing & Urban Development fair housing work would stop, as would some monthly subsidy programs.
The ongoing budget and appropriations negotiations paint a picture of political uncertainty, internal party strife, and the looming threat of a government shutdown. The dynamics of these negotiations reveal the challenges of achieving consensus in a deeply divided political landscape. The implications of a shutdown are far-reaching, affecting everything from national security to environmental protection. As the October 1 deadline approaches, all eyes are on Capitol Hill to see whether lawmakers can avert yet another government shutdown and find common ground on budget priorities.
