The Government Shutdown Threat Is Growing

Plus, CBO outlines cuts that could occur if Congress can’t make a deal ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Happy Thursday! How’s your year going so far? It’s still early, but this is shaping up to be a tough January in the nation’s capital. The Government Shutdown Threat Is Growing Congressional leaders are reportedly moving closer to agreement on topline spending levels for fiscal year 2024, which started back in October, but that doesn’t mean they’re significantly closer to averting a potential government shutdown ahead of looming January 19 and February 2 deadlines. The overall spending level being discussed by aides to Senate Majority Leader Chuck Schumer and House Speaker Mike Johnson represents just one crucial step toward avoiding a shutdown. One idea reportedly being considered for 2024 funding is to keep spending at current levels but not through a continuing resolution, or CR. “This would essentially function as a year-long CR, but would be treated as if it’s a new appropriation,” Punchbowl News [reported](. That approach would avoid the automatic spending cuts that would otherwise kick in under a CR, as required by last year’s Fiscal Responsibility Act. The Congressional Budget Office estimated Thursday that a year-long continuing resolution could result in significant spending cuts. (See more on the CBO analysis below.) Punchbowl notes that Democrats and Senate Republicans have warned against keeping spending levels flat, meaning that the deal being considered may not fly. Beyond that, whatever the topline spending level is, Congress would still need to pass either a short-term CR or full-year funding bills to prevent agencies and programs from shutting down. Further complicating the outlook for the coming weeks: House Republicans are now looking to tie border policy changes to the government funding deadlines, with some saying this week they’d be willing to shut down the government to try to secure more restrictive border measures along the lines they passed in their H.R. 2 bill in May. The Biden administration and Senate negotiators, meanwhile, continue to try to reach a bipartisan deal on border policy that would unfreeze a $110 billion aid package for Ukraine, Israel and Taiwan. “If you’re serious about getting results, you have to be working across the aisle,” Sen. Chris Murphy of Connecticut, the lead Senate Democratic negotiator, told reporters Wednesday, adding: “my impression is that Speaker Johnson has not spent one minute trying to work across the aisle to get a deal on immigration. We are trying to work across the aisle in the Senate to get a bipartisan deal.” Sen. James Lankford, who is leading the Senate negotiations for Republicans, similarly told reporters Wednesday that Republicans must contend with the reality that a push for more restrictive immigrations provisions would be blocked by Democrats. “We still have to be able to do something. We can’t just do nothing and say, ‘We can’t get everything in H.R. 2 so we can do nothing.’” The bottom line: Lawmakers have just a couple of weeks to go before the first shutdown deadline and plenty of issues left to resolve. CBO Outlines Spending Cuts That Could Occur if Congress Can’t Make a Deal With lawmakers still negotiating spending levels for the 2024 fiscal year, the government is operating under a continuing resolution that maintains the federal budget at 2023 levels until January 19 for some agencies and February 2 for the rest. The unusual structure of the continuing resolution as chosen by House Speaker Mike Johnson means that Congress faces two fiscal cliffs in rapid succession, each of which could produce a partial government shutdown. That’s not the only unusual dynamic in play. Under the terms of the debt ceiling deal agreed to by President Joe Biden and Congress last summer, the federal budget faces automatic cuts if lawmakers decide to extend the continuing resolution for the rest of the year, as has happened in the past. Under the terms of the agreement, federal agencies would be hit with across-the-board cuts of 1% on May 1 if lawmakers fail to pass appropriations for 2024 and instead rely on a continuing resolution beyond the deadline of April 30. Under the Fiscal Responsibility Act, signed into law in June just days before the U.S. faced a potential default on its obligations, discretionary federal spending in fiscal years 2024 and 2025 is capped. For 2024, total discretionary funding is capped at $1.59 trillion — $886 billion for defense and $704 billion for nondefense. However, if lawmakers don’t pass the required appropriations bills by the end of April and instead operate under a continuing resolution, automatic cuts take effect. Defense spending would be capped at $850 billion, while nondefense would be capped at $736 billion (an increase over the agreement, but a cut from 2023 spending levels of $777 billion). On Thursday, the Congressional Budget Office provided a more detailed [estimate]( of how those spending cuts would actually play out. The math is complicated due to factors that exempt some spending from cuts, lawmakers’ ability to move funds around and the fact that the fiscal year is already underway, but overall, CBO found that the caps would produce significant spending cuts, especially in nondefense spending. Here’s the summary: “In the scenarios CBO examined, if enacted funding equaled the annualized amount of funding under the continuing resolution, sequestration would be required and would result in across-the-board reductions ranging from 5 percent to 9 percent for nondefense funding and from zero to 1 percent for defense funding, depending on when appropriations were enacted and what form they took.” As CBO notes, the final numbers would be determined by the Office of Management and Budget, which could make adjustments within the terms defined by the FRA. Congress could also affect the outcome by adjusting or eliminating the caps. Rep. Brendan F. Boyle, the senior Democrat on the House Budget Committee, highlighted the CBO letter Thursday, while calling on Republicans to pass 2024 appropriations. “Passing full-year government funding bills is the most basic task of Congress,” Boyle said in a statement. “We cannot allow indiscriminate and harmful cuts to happen because House Republicans are incapable of doing their jobs. We have a bipartisan budget agreement which two-thirds of House Republicans voted for: It’s time for Republicans to stop the posturing, get back to governing, and write appropriations bills that honor the full terms of that agreement.” The Republican chairman of the Budget Committee, Rep. Jodey Arrington of Texas, issued his own statement calling for spending cuts. “With U.S. debt at a record $34 trillion, deficits of almost $2 trillion, and interest payments alone projected to be at $1 trillion next year, it is imperative that elected leaders on both sides of the aisle follow through on their commitment to rein-in spending,” he said. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to [sign up here]( for their own copy of this newsletter. --------------------------------------------------------------- Fiscal News Roundup - [Congressional Leaders Near Deal on Overall Funding Levels but Shutdown Threat Still Looms]( – CNN - [Shutdown Risk Grows With GOP’s Border Fury]( – The Hill - [Texas Democrat Blasts Speaker Johnson for Scoffing at $14 Billion in Border Funds]( – The Hill - [Biden Administration Announces $162 Million to Expand Computer Chip Factories in Colorado and Oregon]( – Associated Press - [US Applications for Unemployment Benefits Fall Again as Job Market Continues to Show Strength]( – Associated Press - [Factory Construction Spending Booms Under Biden]( – Axios - [Most People Dropped in Medicaid ‘Unwinding’ Never Tried to Renew Coverage, Utah Finds]( – KFF Health News - [Trump Received Millions From Foreign Governments as President, Report Finds]( – New York Times - [Paxlovid Cuts Covid Death Risk. 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Stiglitz, American Prospect - [Why the United States Needs to Stop Being a Nation of Losers]( – Catherine Rampell, Washington Post - [Trump Took $7.8 Million in Foreign Cash While in Office. He’d Do It Again]( – Timothy L. O’Brien. Bloomberg - [The High Cost of DeSantis’s Presidential Bid? Vaccine Misinformation]( – Philip Bump, Washington Post Copyright © 2023 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](