White House braces for government shutdown as House Republicans lack viable endgame for funding

The White House is poised on Friday to instruct federal agencies to prepare for a shutdown after House Republicans left town for the weekend without a viable plan to keep the government funded and prevent a politically and financially costly disruption of federal agencies.

A federal shutdown after Sept. 30 looks almost certain unless President Kevin McCarthy can convince the embattled Republican hard right to allow Congress to pass a temporary funding measure to avert a shutdown while they work on the annual federal spending plan . However, the House is not expected to return until Tuesday, leaving just five days to resolve its standoff.

“We have the members working and hopefully we can move on Tuesday to pass these bills,” McCarthy, R-Calif., told reporters on Capitol Hill.

McCarthy has signaled his preference to avoid a shutdown, but a hard-right side of his House majority has effectively seized control. “I still think that if you shut down, you're in a weaker position,” he said.

The standoff with House Republicans over government funding jeopardizes a range of activities — including pay for military and law enforcement personnel, food security and food aid programs, air travel and passport processing – and could destroy the US economy.

With the new fiscal year starting Oct. 1 and without funding, the Biden administration's Office of Management and Budget is preparing to advise federal agencies to review and update their plans for the shutdown, according to an OMB official. The start of that process suggests federal employees could be told next week if they are to be laid off.

President Joe Biden was quick to blame the potential shutdown on House Republicans, who are aiming for spending cuts beyond those contained in a June deal that also suspended a legal limit on the government's borrowing power until early 2025.

“They're back at it again, breaking their commitment, threatening more cuts and threatening to shut down the government again,” during a recent speech in suburban Maryland.

McCarthy is facing enormous pressure for severe spending cuts from a handful of far-right conservatives in his caucus, effectively halting his ability to lead parliament. Many on the right aligned with Donald Trump — the Republican front-runner to challenge Biden in the 2024 election — opposed the budget deal the speaker struck with Biden earlier this year and are trying to dismantle it.

Trump urged House Republicans to press on, pressing them to hold the line against federal spending.

Led by Trump ally Matt Gaetz, R-Fla., the right wing has been tasked with controlling the House debate in a public rebuke of the speaker.

Late Thursday, the far-right faction pushed McCarthy to consider the idea of ​​scrapping plans for a stopgap funding measure, called continuing resolution, or CR, and instead begin introducing the 12 individual bills needed for the funding. of the goverment.

Democratic leadership then announced just that — they would begin working on a package of four bills to fund the Defense, Homeland Security, State and Foreign Affairs and Agriculture agencies, setting up a vote for Tuesday when lawmakers return. Work on some bills had been stalled by the same conservatives who were demanding a vote now.

“Any progress we're making is not because of McCarthy,” Gaetz posted on social media, mocking the speaker for sending lawmakers home for the weekend. “Unfortunate.”

Gaetz and his allies say they want to see the House get involved in the hard work of legislation — even if it pushes the country into a shutdown — as they pursue major reductions and cuts.

The House Rules Committee announced it would meet Friday afternoon to begin preparing those bills, which historically require weeks of floor debate with hundreds of amendments, but are now set to be rushed to the floor for votes next week.

It's a landmark in a difficult week for McCarthy, who has tried unsuccessfully to push through a typically popular defense spending bill that has twice been defeated by embarrassing votes. The speaker appeared to blame the bill's defeat on fellow MPs “who just want to burn the whole place down”.

Shutdowns occur when Congress and the president fail to complete a set of 12 spending bills or fail to pass a temporary measure to keep the government running. As a result, federal agencies are required to cease all actions deemed non-essential. Since 1976, there have been 22 funding gaps, with 10 of them resulting in layoffs.

The last and longest shutdown on record was for 35 days during the Trump administration, between 2018 and 2019, as it pushed for funding for a wall along the US's southern border, which Democrats and some Republicans have denied.

Because some agencies already had funding approved, it was a partial closure. The Congressional Budget Office estimated that it cost the US economy $3 billion. While $3 billion is a lot of money, it was equal to just 0.02% of US economic activity in 2019.

There could be costs to parts of the economy and hardship for individuals.

Military and law enforcement officials would go unpaid during the shutdown. The Federal Emergency Management Agency's disaster relief fund could be depleted, hurting victims of wildfires, hurricanes, tornadoes and floods.

Clinical trials for new prescription drugs may be delayed. Tens of thousands of children could lose access to care through Head Start, while environmental and food safety inspections would be delayed.

Food assistance for Americans through the Women, Infants and Children program could be cut for nearly 7 million pregnant women, mothers, infants and children.

Brian Gardner, chief Washington strategist at investment bank Stifel, said air traffic controllers went unpaid during the previous shutdown. But they largely continued to work without pay. He noted that visa and passport applications will not be processed if the government shuts down.

The US Travel Industry Association estimates that the travel sector could lose $140 million daily in a shutdown.

But in a sign of how little damage this 35-day shutdown did to the overall economy, the S&P 500 climbed 11.6% during the last government shutdown.