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By the start of next week the United States government may have run out of money, with many agencies effectively shut down.
How the row over the US budget for the next year is resolved could have huge implications for the future of Kevin McCarthy as speaker of the House of Representatives. McCarthy is under severe pressure from hard-right elements in his Republican Party in the House who are seeking significant spending cuts.
A government shutdown happens when the US Congress fails to pass funding legislation that can be signed into law by the president. It seems unlikely that the US Congress will be able to pass the 12 appropriations bills that fund government operations before the start of the new financial year – the beginning of October – meaning a government shutdown is on the cards from next weekend.
A government shutdown is different from a US debt default, which was averted by a deal between president Joe Biden and McCarthy in the early summer on raising the official federal spending and borrowing limits. A debt default would have been unprecedented and generated chaos on world markets.
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There have been a number of shutdowns due to political disputes in Washington over recent decades.
US financial services group Goldman Sachs has forecast that a shutdown would reduce economic growth by 0.2 per cent every week. However, it predicted that growth would bounce back quickly after the issue was resolved.
If a plan to fund the government is not agreed by October 1st, federal agencies will have to stop all non-essential work. Hundreds of thousands of staff would be temporarily suspended or furloughed. Those in occupations deemed critical, such as police and air traffic controllers, would remain in their posts without pay. Personnel would receive back-pay when government funding is authorised.
As part of a shutdown, services provided by federal agencies could face delays although criminal prosecutions, including the two cases being brought against former president Donald Trump, would continue.
Trump has backed a government shutdown and told Republicans it would be the “last chance” to stop prosecutions against him and other “patriots”.
On Saturday night Biden said if there was a government shutdown it would mean that “members of the US military are going to have to continue to work but not get paid”.
“A government shutdown could impact everything from food safety to cancer research to Head Start [child development] programmes for children.”
Biden specifically blamed Republicans for the impasse because they blocked an agreement on funding that formed part of his deal on the debt ceiling reached with McCarthy in June. “Just a few months ago after a long negotiation between myself and the new speaker of the House we agreed on spending levels for the government that will fund essential domestic and national security priorities while still cutting the deficit by over $1 trillion over the next decade. Now a small group of extreme Republicans don’t want to live up to the deal, so now everyone in America could be forced to pay the price.”
Biden said funding the government was one of the most basic responsibilities of Congress. “It’s time for Republicans to start doing the job America elected them to do.”
On foot of the Biden/McCarthy deal in June, Congress passed legislation that lifted the debt ceiling but also set limits on annual appropriated spending for the financial year ahead. There was a general expectation that spending levels in the subsequent 12 appropriation bills for next year would come within the overall levels contained in the legislation enacted in June.
But a group of right-wing members of the Republican Party in the House of Representatives were never happy with the Biden/McCarthy deal and are insisting on lower government spending next year.
Other issues include objections from some Republicans to further US funding to Ukraine.
Biden contended at the weekend that under proposals of the right-wing Republicans, funding for education and policing would be “slashed”.
Republicans won control of the House in midterm elections last November. However, with a very small majority, a group on the right wing have considerable leverage. In a deal to secure their support to become speaker in January, McCarthy agreed to change the rules to allow just one member to table a vote to oust him.
Amid open infighting among House Republicans over recent days, some on the right have warned that McCarthy will effectively face a vote of confidence if he acts alongside Democrats to get a funding agreement over the line against their wishes.
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After weekend internal party talks, McCarthy seems set to try get the House to pass some of the 12 appropriation bills this week. But it is highly unlikely the process will be completed – and considered by the Senate – by the October 1st deadline. To get around this the House could introduce stopgap measures to keep the government open for a number of weeks while work continues on the overall legislation.
However, some of those on the right have declared they would never vote for any such temporary resolution. Whether McCarthy can persuade them to change their minds before the government runs out of money next weekend remains to be seen.