CHN: Government Shutdown Followed by Economic Meltdown? A Way Out Remains Elusive

The federal government has been shut down for almost a week.  The public does not like it.  The drivers of the shutdown strategy are starting to acknowledge it has failed to stop or delay the new health care law.  The House has begun to enact funding measures for popular programs such as the national parks, veterans’ services, and WIC.  The Senate has rejected this piecemeal approach.  Divisions among Republicans attempting to extricate themselves from a bad spot are increasingly public.  While no end is in sight for the shutdown, the deadline is approaching for an economic meltdown.  That would be the point at which the federal government exhausts its authority to borrow, said to be October 17.  Most of government would come to a standstill.  Benefits now exempt from the shutdown – such as Social Security and SNAP/food stamps – would not be paid.  Treasury Secretary Jack Lew and prominent economists have predicted that such a self-inflicted crisis would plunge the nation back into a recession.  Is there a way out?
The logjam continues.  House Speaker John Boehner (R-OH) maintained in a Sunday talk show appearance that he would not bring legislation to the floor that would temporarily fund the government or raise the federal borrowing limit without attaching conditions.  He said, “There are not the votes in the house to pass a clean CR.”  But the Huffington Post and ABC News both have compiled lists of Republican House members who have gone on record in favor of a “clean” Continuing Resolution, or stopgap spending bill.  As of Sunday night, Huffington Post has 22-23 members on its list.  When added to a unified House Democratic caucus, that would be more than enough to pass a spending bill.

If the Speaker is opposed to bringing a spending bill with no strings attached to the floor, it is difficult to go around him.  One means available under House rules is the discharge petition. If members can collect 218 signatures on such a petition (a majority), the bill must be taken up.   Democrats have announced that they plan to file a discharge petition, and expect to get all 200 in their caucus to sign, plus enough Republicans to form a majority.  However, discharge petitions have brought bills to the floor only twice in the past, because members are reluctant to rebel against their leadership in such a public way.  As part of an effort to put pressure on House Republicans who do not want the shutdown to continue, the discharge petition can serve a useful purpose, even if it does not succeed directly.

Speaker Boehner has been attempting to shift the onus for the shutdown onto the President and the Senate Democrats, saying they are refusing to negotiate.  President Obama has responded by saying that he will not negotiate while there is “a gun held to the head of the American people.”  Both the President and Senate Majority Leader Reid (D-NV) have been willing to negotiate on the FY 2014 budget; in fact, the Senate has repeatedly called on the House to name conferees to work out the budget, which has been rejected by the House.

Big fight over short-term spending.  Ironically, the current logjam is not about a long-term deficit reduction plan.  It is not even about setting the funding for the full fiscal year.  At issue now is only a short-term spending bill to keep the government open for a month or two.  The House and Senate are already in agreement that the temporary spending should be at last year’s levels.  The House extends spending through December 15 and has tied spending to de-funding or delay of the Affordable Care Act; the Senate extends spending through November 15 with no strings attached.  The Senate is seeking the earlier deadline in order to leave maximum time to negotiate a full-year spending bill.  The Senate majority continues to press for ending sequestration cuts, with appropriations set at $1.058 trillion.  The House wants another year of sequestration cuts, which would take funding down to $967 billion, but they would protect the Pentagon by making the cuts to domestic programs even deeper.  If Congress does not agree to changes to the Budget Control Act (the deficit reduction law enacted in 2010), another round of sequestration cuts will be triggered this year.  The House will get the $967 billion in spending it wants, but cuts in Pentagon spending it doesn’t want will be enforced.  By extending the temporary spending bill only to mid-November, the Senate hopes to get an agreement on undoing sequestration.

The goal of any negotiations has been shifting among House and Senate Republicans.  Most Tea Party-aligned members are continuing to press proposals to de-fund or delay the health care law, although there are some who have abandoned that position.  Rep. Dennis Ross (R-FL) is associated with the Tea Party, but has concluded that the quest to de-fund the health care law is unwinnable at this time.  “We need to move on and take whatever we can find in the debt limit,” he told Bloomberg NewsAmong the conditions that have surfaced as possible demands for raising the debt limit, in addition to delaying the health care law, are approval of the Keystone XL pipeline, de-funding of the Consumer Financial Protection Bureau, revenue-neutral tax reform, and cuts to Social Security, Medicare, SNAP/food stamps, and other entitlement programs.  Rep. Marlin Stutzman (R-IN) garnered the Washington Post’s Worst Week in Washington award for his expression of his caucus’ moveable goals:  “We’re not going to be disrespected…We have to get something out of this.  And I don’t know what that even is.”

Reducing the scope of the shutdown.  In the meantime, the House has passed unanimously a bill to provide retroactive pay to federal workers who have been furloughed, and the Senate promises to follow suit.  The President will sign it.  Workers will still have to wait for their pay, and are in effect on an enforced paid leave.  President Obama previously signed a law to ensure that troops are paid.  Secretary of Defense Chuck Hegel has ended furloughs for about 350,000 Defense workers.  The House has responded to the unpopularity of the shutdown by separately passing measures to provide temporary funding for national parks, National Institutes of Health, veterans’ services, the National Guard and Reserves, the Federal Emergency Management Agency (FEMA), and the WIC nutrition program for young children and pregnant women.  More mini-funding bills are headed to the House floor.  None of these are expected to be taken up by the Senate, which wants all of government to function.  (For a description of the ways in which the government is not functioning now, see CHN’s Federal Shutdown Impacts.)

Last week, there were reports that Speaker Boehner had made assurances he would not allow the federal government to default on its debts, even if he had to get to a majority with a sizable number of Democrats.  But such steps back from the brink were not in evidence in his Sunday talk show appearance.

As the likelihood grows of severe damage to the economy and public opinion opposing the shutdown and meltdown intensifies, there will be pressure to agree to clean extensions.  Whether those happen before or after serious damage is inflicted is still unknown.

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