Deadline for federal funding approaches. Will the government shut down?
The possibility of a partial government shutdown is increasingly looming, as Congress has yet to come to an agreement on federal funding a day before it expires.
Current funding expires at midnight Friday. Unless Congress passes a temporary funding measure, called a Continuing Resolution, the government would then partially shut down, resulting in hundreds of thousands of holidays and the shutdown of government institutions.
Due to the short deadline, the only way to avoid a shutdown is for all 100 senators to agree to schedule a vote before the deadline.
“Any member can stand up and say I want a stop unless I get something done,” Senate Majority Leader Chuck Schumer (D.-NY) said Wednesday. “We’ll see what happens. It’s up to the leaders to make sure there is no stopping. I make sure and I think Leader [Mitch] McConnell wants to try to make sure of that, too. Hopefully. “
Senatorial Minority Leader McConnell (R.-Ky.) echoed Schumer’s assurances on Wednesday that a deal was near.
“I think everything will be fine,” he told reporters.
But there had been no deal when the House and Senate adjourned Wednesday, even though House Democrats were hoping to vote on the interim measure at the time.
While party leaders on both sides of the aisle want to avoid a shutdown, Democrats and Republicans still disagree on some key funding details. Democrats are pushing for a resolution with a shorter deadline in an attempt to pressure Republicans to negotiate the long-term budget for fiscal 2022. Republicans have indicated they are willing to extend the resolution continues for up to a year.
“If there is no progress [after Dec. 3], we could move towards an annual CR. A lot of people would like that, ”Senator Richard Shelby told reporters in early November.
“The Senate Republican Conference enjoys significant leverage against these mandates,” the caucus wrote in a letter to McConnell Wednesday. “We are therefore writing to ask you to use all the procedural tools at your disposal to deny the timely adoption of the RC unless it prohibits funding – in all respects – for the mandates of vaccination and their application. “
Some of those Republicans have suggested breaking the deadlock by allowing a simple majority vote on an amendment to the temporary funding bill that removed funding from vaccine mandates.
As of Monday, three judges have frozen federal rules on Covid-19 vaccines in parts of the country. A Louisiana federal judge on Tuesday suspended the administration’s mandate requiring healthcare workers to be vaccinated.
Congress is also set to pass legislation raising the country’s borrowing limit ahead of the year’s suspension, as Treasury Secretary Janet Yellen continues to warn of the consequences of delaying the decision.
“I cannot stress enough that it is essential that Congress address this issue,” Yellen said at a Senate Banking Committee hearing on Tuesday. “America needs to pay its bills on time and in full. If we don’t, we’ll gut our current recovery. “
Yellen still estimates that the Treasury could run out of funds as early as December 15, around the same time the Treasury invests a $ 118 billion loan in the Highway Trust Fund. The Bipartisan Policy Center estimates that the “X” date could be between mid-December and early February.
Democrats are still announcing a bipartisan solution to raising the debt ceiling, with Schumer expressing optimism that a compromise can be reached.
“I recently had a good conversation with the Republican leader on this issue, and I plan to continue these discussions on finding a bipartisan solution to the debt limit problem,” Schumer said during a speech delivered on Tuesday.
But Republicans strike a different note, still pushing Democrats to raise the limit through budget reconciliation, a process that bypasses the 60-vote obstruction and allows them to increase it through a one-party vote.
“Our fellow Democrats can raise the debt ceiling on their own whenever they want, and Republicans can do nothing to stop them,” said Sen. Patrick Toomey (R.-Penn.) During the hearing of the Senate Banking Committee.
Schumer and McConnell met on November 18, but did not announce any final compromises.
“We’re okay with keeping talking, working together to try to get somewhere,” McConnell told reporters afterward.
Failure to meet the debt ceiling could have far-reaching repercussions. After a showdown in 2011 in which Congress narrowly avoided defaults on its loans, Standard & Poor’s downgraded the United States’ long-term credit rating from AAA to AA +. The Office of Government Accountability estimated later that the delay in raising the debt ceiling increased the government’s borrowing costs by $ 1.3 billion in 2011. The S&P 500 fell almost 20% before recovering.
“A US government default would be far worse than the collapse of Lehman Brothers in 2008,” said Beth Ann Bovino, chief economist at S&P Global US. A default would “push the US economy back into recession, wiping out much of the recovery’s progress,” she added.
Government closures, on the other hand, have generally not been a problem for the stock market. Goldman Sachs analysis showed that in the 14 closings since 1980, the S&P 500 has posted a median return of -0.1% on the day the budget was due to expire, 0.1% during close times and 0 , 3% on the day the closure was resolved.
But a government shutdown could still hurt GDP growth, costing fourth-quarter real GDP growth about $ 1.8 billion for every week the government is shut down, according to a new report from S&P Global Economics.
“The shutdown would increase inflation in the fourth quarter, which is currently skyrocketing, giving the Federal Reserve another headache to face,” the report said.
Write to Sabrina Escobar at [email protected]