The possibility of a government shutdown is looming large. House Republicans are feuding over a stopgap funding bill meant to keep the government running after the fiscal year ends on Sept. 30. The dispute between moderates and the hard right highlights the challenge before House Speaker Kevin McCarthy (R-Calif.).
On Thursday, the path to passing such a bill in the House was unclear after the battling GOP factions voted down a longer-term Defense Department spending bill on a procedural measure. Even if the House does pass a short-term spending bill, known as a continuing resolution, the Democratic-controlled Senate is expected to reject it for leaving out key funding.
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What is a government shutdown?
The government is typically funded by 12 annual appropriations bills, each of which covers different agencies or groups of agencies. In recent years, some or all of these 12 bills have been rolled into a single “omnibus” package and approved together.
The current spending laws expire on Sept. 30, the end of the government’s fiscal year. Any part of the government whose appropriations bill hasn’t passed and been signed into law by midnight on Oct. 1 - the start of the next fiscal year - could shut down. A partial shutdown would occur if some but not all of the bills are enacted.
During a shutdown, the government can’t, for the most part, spend money, meaning that hundreds of thousands of federal workers won’t receive a timely paycheck, that facilities such as national parks will be closed and that food stamp payments will go unfulfilled.
But unlike in a government default, U.S. bond payments aren’t at risk - those aren’t funded through annual appropriations, so they continue despite the shutdown.
McCarthy had promised conservatives that, in return for their support in his bid to become speaker, the House would handle each bill separately. By Wednesday, the chamber had passed only one of the 12, covering military construction and veterans affairs. The Senate had yet to pass any, though lawmakers there disagree less on how much to spend.
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When is the government shutdown deadline?
Congress and the Biden administration have until Sept. 30, when the federal fiscal year ends, to reach an agreement on next year’s budget and prevent a shutdown. Fiscal 2024 begins Oct. 1.
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What are the main disagreements?
The core issue is how much money the government should spend next year. Some hard-right Republicans support lowering the top-line budget to about $1.4 trillion, which is below the $1.6 trillion agreed upon by McCarthy and President Biden earlier this year. But some moderates have said they have no incentive to cut spending further.
Democrats have ridiculed the idea they should vote for a lower spending number than McCarthy and Biden agreed on in May. Bobby Kogan, senior director of federal budget policy at the left-leaning Center for American Progress, said over the summer that the GOP appeared to be trying to force Democrats to make concessions on other matters in exchange for sticking to the original spending agreement.
“I just go back to when I was growing up. I learned that once you make an agreement, you don’t renege on it. You stick with it,” Rep. Brendan Boyle (Pa.), the top Democrat on the Budget Committee, said Wednesday. “We reached an honorable, fair agreement that passed by an overwhelming number despite all of the critics saying it was impossible. It is time for us to get back to that agreement. It is time for all of us to honor our commitments and make sure that this country does not enforce a government shutdown on the American people.”
The House appeared to agree Wednesday night to a plan to cap overall discretionary government spending next year at about $1.5 trillion, less than the debt ceiling deal calls for. But it wasn’t clear they have the votes to pass that plan, nor did they agree on a short-term funding bill. House Republicans don’t want any short-term bill to include the billions of dollars the White House and Senate want for Ukraine aid and for natural disaster relief in the United States.
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What are Republicans proposing to avert a shutdown?
Some GOP lawmakers are considering a shell bill that would serve as vehicle for moderates to supersede McCarthy’s control of the House floor and force a vote to keep the government open, three people familiar with the plan told The Post. While the details remain unknown, the measure is likely to include a short-term funding plan that could garner enough support from House Democrats and the Senate to prevent a shutdown.
A deal could also be struck between the Republican Governance Group and the New Democrat Coalition in the House, lawmakers familiar with the matter said, though a compromise with Democrats would be a last-case scenario for Republicans.
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Who would be affected by a shutdown?
Government shutdowns affect most federal workers. Hundreds of thousands of them could be sent home unpaid, while those who are excepted from the shutdown - such as employees in public safety - continue to work, but unpaid. (Once the shutdown ends, workers are compensated in full for their missed paychecks.)
Postal Service operations will continue because the agency is largely self-funded through the sale of postage products. Social Security recipients will continue to receive payments, which aren’t funded through annual appropriations, but the Social Security Administration will not issue Social Security cards until a shutdown ends.
Other impacts can include missed food stamp payments and disruptions to environmental and food inspections. If the shutdown continues long enough, it could also affect the broader economy.
Wall Street investors tend to shrug off government shutdowns, said Sam Stovall, chief investment strategist at CFRA Research, because they’ve usually been short-lived. In the 20 shutdowns since 1976, stock prices have barely budged - down an average of 0.4 percent the week before, up 0.1 percent the day of, and up 0.1 percent during the entire shutdown period, according to CFRA.
But there can be stronger effects on the wider economy. Missed paychecks for government workers can dent consumer spending, which has remained strong since the initial shock of the covid pandemic, said Dan Ives, managing director at Wedbush Securities.
“If a shutdown actually happens,” Ives said, “it takes up [gross domestic product] every day it goes on.”
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When was the last government shutdown?
The most recent government shutdown started in December 2018 during a dispute between President Donald Trump and House Democrats over the proposed U.S.-Mexico border wall. It lasted 34 days, which made it the longest shutdown in U.S. history.
The shutdown ended when delays hit major East Coast airports as unpaid air traffic controllers didn’t report to work.