House Republicans are charging toward a US government shutdown in less than 10 days as party lawmakers struggle to agree on how much to cut spending and how to explain their brinkmanship to the public.
(Bloomberg) — House Republicans are charging toward a US government shutdown in less than 10 days as party lawmakers struggle to agree on how much to cut spending and how to explain their brinkmanship to the public.
The GOP’s bitter divisions have made them unable to even formulate a concrete set of demands. That foreshadows an extended standoff with the White House and the Democratic-controlled Senate as the US economy absorbs shocks from the shutdown, autoworkers strike and rising gasoline prices.
And the Republican Party’s presidential front-runner and most prominent figure, Donald Trump, has further complicated the turmoil, presenting the clash as a way to halt criminal cases against himself and others who tried to overturn the 2020 election.
Republican infighting torpedoed plans for a Saturday House vote on a temporary spending bill crafted to meet conservatives’ demands and serve as a starting point in negotiations with the Senate. On Thursday, House Speaker Kevin McCarthy sent lawmakers home for a long weekend after two ultraconservatives ambushed him on a procedural vote.
In a preview of how this might play out in next year’s elections, President Joe Biden seized on the decision to forego weekend votes.
“Last time there was a government shutdown, 800,000 Americans were furloughed or worked without pay,” Biden said on X, formerly known as Twitter. “But enjoy your weekend.”
McCarthy’s latest plan is for the House to vote next week on a few spending bills that address conservative demands for deeper cuts, with the State and Agriculture Departments as potential targets. Those measures could then entice holdouts to eventually support a separate short-term funding bill.
“Hell no, they aren’t going to become law,” Representative Steve Womack of Arkansas, a McCarthy ally, said of those bills. He added, however, that they might give House Republicans a stronger opportunity to have friendlier conversations on resolving differences.
Moderate Backlash
But the divergent agendas pressed by the GOP’s quarreling camps and McCarthy’s precarious position within his own ranks could make an eventual deal with Democrats harder to accomplish than in previous standoffs. At the same time, muddied justifications for a shutdown heighten the danger to swing-district Republicans, who would face voter backlash over disruptions in government services.
Representative Mike Lawler of New York, one of 18 Republicans who represent districts Biden won in 2020, said Thursday he would join with Democrats to force a House vote on short-term funding for the government — stripped of conservative demands — if his party can’t come up with a plan to avoid a lapse.
“I will do everything in my power to avoid a shutdown,” said Lawler, who represents the Hudson Valley.
Unlike the unprecedented US default and potential tumult in global financial markets threatened during Washington’s debt-limit confrontation earlier this year, the economic consequences of a shutdown largely depend on how long it lasts.
A lapse in federal funding would cut 0.2 percentage points from GDP for the quarter each week it lasts, estimates Bloomberg chief US economist Anna Wong. With forecasters already anticipating slower growth, an extended shutdown risks tipping the US into a recession. A shorter one carries less risk.
Your Questions Answered on US Government Shutdown: QuickTake
The drama would play out at a vulnerable moment for the economy. The peak impact of the US Federal Reserve’s interest rate increases is about to hit, oil prices are rising and consumer spending is expected to weaken as student loan payments resume in October.
Financial markets are more focused on the outlook for continued elevated Fed interest rates. A shutdown may push up longer-term Treasury debt yields, further increasing borrowing costs for corporations and government entities.
Treasury yields have typically fallen in previous shutdowns as risk-averse traders migrate to the safety of US bonds. But JPMorgan Chase & Co. warned clients this fiscal showdown may have the opposite effect, given the Fed’s hawkish policy resolve.
“Any perceived lack of ability to govern might actually drive Treasury yields higher in the coming weeks,” JPMorgan fixed-income strategists led by Jay Barry said in a report.
For all the rancor they generate, shutdowns usually fail to achieve the goals of those who provoke them. The 35-day shutdown after the 2018 midterm elections over Trump’s demand for border wall money did not result in the barrier being built, while the 2013 shutdown over Obamacare failed to kill the program.
The turmoil in Washington was vividly displayed Thursday as two dissident conservatives, Representatives Marjorie Taylor Greene of Georgia and Eli Crane of Arizona, voted against bringing up a military spending bill, typically popular with GOP members. McCarthy was left fulminating over what he said was a reversal of stances the two had communicated to party leaders.
“This is a whole new concept of individuals that just want to burn the whole place down,” McCarthy said. “That doesn’t work.”
Representative Chip Roy, a hardliner from Texas, suggested Republicans shouldn’t back down despite the disruption involved.
“The shutdown is less the question,” Roy said. “It will be more devastating if Republicans don’t unite and send a message to the American people about what we’re fighting for.”
–With assistance from Edward Harrison.
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