US government shutdown threat looms as House Republicans see opportunity for demandsUS House Republicans are gearing up to use the looming threat of a government shutdown as an opportunity to confront Democrats over border enforcement. This tactic aims to put aside internal disagreements among GOP lawmakers regarding the extent and location of federal spending cuts while simultaneously setting the stage for a potential showdown with Democrats. If unresolved, this could lead to a government shutdown on October 1st.
Congress grapples with budget deadlock
As the fiscal year-end approaches, Congress faces the task of either passing the 12 annual appropriations bills that constitute the federal budget or approving a continuing resolution to extend the current budget and prevent a government shutdown. Both Senate and House leaders are leaning towards a short-term stopgap measure to extend the existing budget and avoid a shutdown.
However, some House Republicans, particularly the far-right members of the House Freedom Caucus, are demanding specific provisions in the spending measure. They have insisted on including the Secure the Border Act of 2023, addressing their concerns about the Justice Department and FBI, and halting what they perceive as “woke policies” in the Pentagon undermining the military. Their stance puts them at odds with leadership.
Since Republicans have only a narrow majority in the House, losing the support of the House Freedom Caucus members could potentially lead to a government shutdown. In contrast, the Senate, where Democrats hold control, has exhibited more bipartisan unity regarding the spending package. Senators from both parties have criticized the House members for the ongoing stalemate in negotiations.
US’s possible shutdown could be the most expensive
The potential government shutdown looming in just 13 days could surpass the most expensive one in history, which cost around $3 billion in 2019, as estimated by the Congressional Budget Office. The current political climate, characterized by deeply divided factions and added risks from credit rating agencies, creates uncertainty about the financial toll of this shutdown, particularly if it extends for an extended period.
Each day of a shutdown translates to mounting costs for the government and the US economy. While some delayed spending is eventually recouped after reopening, studies suggest that billions of dollars may be irreversibly lost. Goldman Sachs predicts a baseline shutdown duration of two to three weeks, with others considering even longer timelines, like Moody’s Analytics chief economist Mark Zandi’s suggestion of a shutdown lasting the entire fourth quarter, which would be unprecedented.
Some conservative Republicans downplay the impact of a shutting down, viewing it as a temporary pause in nonessential spending. However, experience shows that even partial shutdowns have significant economic consequences. In 2019, a partial shutdown delayed $18 billion in federal spending and reduced first-quarter GDP by $8 billion, with $3 billion of that being permanently lost due to various factors.
It’s worth noting that the estimates provided do not encompass the indirect negative effects of shutting down, which are harder to quantify but likely grow more significant with prolonged closures. This year’s lack of consensus on any appropriations area in Congress raises the specter of a full shutdown, potentially with broader and more substantial costs.
Trump supports calls for government shutdown
Former President Donald Trump has voiced his support for Republicans holding firm on the threat of the government shutting down. He emphasized that he would back such a move if both parties failed to reach an “appropriate deal.” With Congress deadlocked and only two weeks remaining before a potential shutdown, Trump’s comments add to the mounting pressure.
Earlier this year, Trump also urged Republicans to consider allowing the country to default on its debt, a move that most economists view as economically perilous. This stance was tied to his demand for “massive cuts.” However, both parties eventually reached an agreement to extend the debt ceiling until 2025, thereby preventing a historic federal default.
US looking to avoid shutdown
House Speaker Kevin McCarthy has expressed his determination to avoid a shutdown, as he believes it would weaken his party’s position in negotiations for spending cuts, a priority for Republicans. McCarthy emphasized that shutting down the government would not be in the best interest of the American public and would diminish their bargaining power.
While some House Republicans anticipate a potential partial government shutdown or a failure to reach a deal for a temporary funding extension, McCarthy’s stance clashes with House GOP conservatives who are pushing for spending cuts, border security measures, and other demands that Democrats oppose. He emphasized that he has never witnessed anyone benefiting from a government shutdown.
In the internal maneuvering within the party to finalize a House version of the federal spending plan, McCarthy stated that he plans to bring the defense funding bill to the floor this week, regardless of the outcome. Last week, McCarthy had to withdraw a Pentagon spending bill from the House floor due to a lack of support within his party.
Additionally, McCarthy expressed optimism about reaching an agreement on spending bills this week, referring to an agreement among House Republicans.
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