U.S. senators and representatives returning from their summer vacations will need to shake off their suntans in quick time and get down to business.
Congress has just 11 days when it’s in session before the next federal fiscal year begins on Oct. 1, 2023. And in that time, it will need to enact all 12 appropriation bills to ensure that government agencies and departments have funding to keep programs going – or face a potential government shutdown.
So will they pull it off? And what will happen if they don’t? As an expert of public policy and former deputy director of the Congressional Budget Office, I feel that the challenge this year is the greatest faced since the enactment of the Congressional Budget Act of 1974, which made significant reforms in the process. This is due to the magnitude of the differences not only between the two parties but also between the House and Senate. A worse-case scenario could see a government shutdown for several weeks, or even a couple of months – and that could have a significant negative impact on the economy.
One down, many to go
The House of Representatives initially faced a workload of 12 appropriation bills to get through Congress. But just before the House broke for August recess, it passed one appropriation bill, for military construction.
One down, 11 to go. The problem is the military construction bill is traditionally the easiest to pass, as it is very small – this year it stood at US$19.1 billion in spending. This is substantially less than the largest bill, which is usually the Labor, Health, Human Services and Education bill. When reported, or passed, out of the committee in the Senate this year, that bill amounted to $224 billion. Providing money for military construction is also generally done without much controversy, as it includes funding for housing military families – something few members want to oppose.
And while the military construction funding bill passed before the recess, the House leadership had also hoped to pass the Agriculture, Rural Development, and Food and Drug bill but did not have the necessary votes for passage.
Complicating matters is that ongoing funding bills could be delayed or derailed by ideological battles in Washington.
The conservative Freedom Caucus in the House is pushing for tens of billions of dollars in cuts in the eight appropriation bills that fund domestic spending. The other four are military construction; defense; state and foreign operations; and the legislative branch itself.
Part of this desire for cuts comes from the frustration that conservatives feel over there being virtually no reductions in the Fiscal Responsibility Act of 2023, which lifted the debt ceiling and was negotiated by House Speaker Kevin McCarthy and President Joe Biden in late May.
Members of the Freedom Caucus are also expected to push for several riders on the appropriation bills that would restrict abortion rights and eliminate funding for LGBTQ+ centers and diversity and inclusion programs. These will be vehemently opposed by Democrats and potentially create an impasse in negotiations.
Another complicating factor is that, recently, the administration submitted to Congress a request for a $45 billion supplemental appropriation that includes $24 billion for the war in Ukraine.
In the past, these measures would often be attached to either an individual appropriation bill or what is known as a continuing resolution. A continuing resolution generally funds the government at the same level as in the preceding year for a short time, usually a number of days or weeks.
However, there are Republicans in the House who may object to moving such a bill. Congress would also have to declare an emergency to exempt it from the caps in the Fiscal Responsibility Act.
Members in the House prefer to pass individual appropriation bills, since those are easier to amend. But with time running out, they may be forced to combine all of the outstanding bills into an omnibus bill – with the hopes that it could pass by Oct. 1.
While, constitutionally, appropriation bills must start in the House, they have to be reconciled with whatever version the Senate passes.
The good news here is the Senate Appropriations Committee has reported all 12 bills out of committee and thus is ready for the full Senate to consider when it returns. It has also agreed to raise the caps on national defense spending by $8 billion and domestic spending by $5.2 billion above the caps in the Fiscal Responsibility Act.
But differences in spending between what’s in the bills passed by the Senate committee and the much lower levels desired by many Republicans in the House, combined with the ideological arguments over the various riders expected to be adopted by the House, is setting the stage for a chaotic time in late September and early October.
A history of shutdowns
So what is likely to happen?
Given the limited number of days the House is in session in September, the speaker has floated the idea of a short-term continuing resolution. This approach has been endorsed by the White House to give time to negotiate a permanent solution. But the Freedom Caucus has indicated it will oppose such a measure unless it can attach many of its ideological riders.
Which would leave Congress – and the country – facing a funding gap or potential government shutdown.
Since the 1974 Budget Act, there have been 22 such gaps or shutdowns due to the inability of Congress to enact all the appropriation bills. Three of these shutdowns have been significant.
The first lasted 21 days in 1995-1996 during the Clinton administration. It started as a standoff over the debt ceiling but then included disagreements on the appropriations bills.
There were some unique aspects to this standoff. The Republican Senate leader, Bob Dole, was running for president and was not really interested in lengthy negotiations. Meanwhile, House Speaker Newt Gingrich made some inappropriate comments about being snubbed by the president while traveling on Air Force One, and the press had a field day by linking the shutdown to the snub. Polling showed that the Republicans were being blamed for the shutdown - one indicated 46% blamed Republicans, while only 27% blamed Democrats. Republicans finally accepted the Clinton budget proposal.
The second major shutdown lasted 16 days in 2013 during the Obama administration and was triggered by a dispute regarding the implementation of the Affordable Care Act. It ended with an agreement between the Obama administration and Republicans on a continuing resolution to fund the government.
The most recent significant funding gap occurred in December 2018 during the Trump administration, when the president stated he would not sign an appropriations bill that did not include his request for $5.7 billion to build a wall on the U.S.-Mexico border. This shutdown lasted 35 days – the longest in history.
A record shutdown?
Shutdowns eventually end, but not without first causing damage. Politically, the Republicans received virtually nothing beneficial from the 1995 or 2018 shutdowns, and were in fact blamed for both. Similarly, Republicans received little in 2013 but also seemed to receive less blame.
But there is more than political face-saving at play. The economic cost of the 2018 shutdown was estimated by the Congressional Budget Office to be $3 billion in the fourth quarter of 2018 and $8 billion during the first quarter of 2019. Much of this was recovered during the next several quarters, but the impact on the individual families of furloughed government workers and businesses that were not able to receive loans or certificates to operate were far greater.
Perhaps more important than the impact on the economy are the huge inefficiencies that are created by the uncertainties regarding funding in government purchases, particularly in national defense and other capital purchases. Federal contractors cannot extend long-term contracts until the bills are passed. This forces them into numerous short-run extensions, which are substantially more expensive.
With so much at stake, expect a stormy and chaotic session with huge partisan differences – as well as discrepancies between the House and Senate – regarding spending levels and riders to appropriation bills.
Congress has just 11 working days to pass these bills, and that seems virtually impossible, especially in the current political climate.
So brace for numerous short-run continuing resolutions. But, ultimately, I expect at least a partial government shutdown. I even wouldn’t rule out a much longer shutdown of a couple of months that exceeds the record 35 days during the Trump administration.