Just a couple weeks ago, President Joe Biden was signing the debt ceiling deal he’d forged with House Speaker Kevin McCarthy (R-CA) into law, prompting a communal sigh of relief as we skirted economic catastrophe.
The peace was short-lived.
Now Capitol Hill is abuzz with fears about impending government shutdowns, irritation at House Republicans (even from some of their Senate counterparts) and gaming out how the next few months will unravel. Here’s what’s going on.
Spending fights and debt ceiling fights: Two different things
Raising the debt ceiling and the appropriations process are separate things, and come with different threats. Congress must periodically raise or suspend the debt ceiling to allow the U.S. to fulfill its financial obligations, including paying back its debts. While Republicans often pretend this is about “reining in future spending,” it’s all about authorizing money that Congress has already allocated. If Congress (and, this time, the Biden administration) had been unable to come to an agreement to suspend or raise the limit, the U.S. would have defaulted on its obligations, an unforced error so historic and enormous that experts are not completely certain about the extent of the damage that would be done both domestically and globally.
The annual appropriations process that Congress has now begun sets the government’s budget for the next fiscal year. Congress often passes continuing resolutions (CRs) at points during this process, temporary spending bills that keep the government operating while Congress and the President continue to haggle over final appropriations — e.g. the finished budgets for the various pieces of the government.
Should Congress fail to pass, or should the President fail to sign, either a CR or an appropriations package by certain deadlines in the process, the government shuts down. Shutdowns usually last a few days — sometimes up to a week or two — and are much less disastrous than default would be (though they are embarrassing for the government, send federal workers’ jobs into flux and often result in things like national parks being closed).
So what’s going on now?
The reason these two things are linked right now is that the aforementioned debt ceiling law — founded in a compromise struck last month by Biden and McCarthy — included some stipulations for the appropriations process, including spending levels. So, after this bipartisan deal between Biden and McCarthy was struck, the thinking was that the congressional appropriators would write their various spending bills to the levels agreed upon in the deal, making for a much smoother process than usual.
Right?
Wrong.
House Republicans, some of whom are furious at McCarthy for making the debt ceiling deal with Biden, are insisting on retribution in the form of extremely low levels of spending. Those spending levels agreed to in the deal, they say, are a ceiling that they want to be far under.
McCarthy gave the appropriators the green light to do this, seemingly concerned about angering the right flank of his caucus.
“Two weeks after the deal passed, House Republicans decided to renege on their own deal — everyone else was content to not have this hullabaloo,” Bobby Kogan, the senior director of Federal Budget Policy at the Center for American Progress, told TPM.
So far, that’s remained the case. Sens. Patty Murray (D-WA) and Susan Collins (R-ME), the lead Senate appropriators, are writing their bills to the spending levels agreed upon in the debt ceiling law, leaving the House Republicans on an island.
The shutdown risk that everyone’s talking about
But the House Republicans’ refusal to work by everyone else’s parameters — on display repeatedly throughout the year — also increases the likelihood of a shutdown. There are two big moments where this could happen.
October 1 is the beginning of the new fiscal year, and, before it begins, Congress must produce a CR or an appropriations package to avert a shutdown. In recent history, Congress almost always uses a CR to buy itself more time to finish the appropriations — it’s “what we’re used to seeing,” Molly Reynolds, a senior fellow in Governance Studies at Brookings, told TPM.
The other moment comes in January, and connects back to the debt ceiling law again.
If they use a CR in October, which is what most experts expect, there is a January 1 deadline for Congress and the President to get the appropriations bills finalized (again, to prevent a shutdown).
But there’s an extra twist on the January deadline, thanks to provisions tucked into the recently passed debt ceiling law. If they fail to pass an appropriations package or try to just pass a CR instead (for any part of the government), the entire budget is slashed to 2023 levels minus one percent (this is known as sequestration and is not actually enforced until April 30 despite the January 1 “deadline”). Critically, that would include the defense budget — and that’s the stick to keep Republicans from walking away, as that’s a pot of money they are historically loath to reduce.
“We think about this provision ‘preventing a shutdown;’ it does so only to the degree that it incentivizes Congress to complete their work by January 1 by creating this looming specter of cuts, especially on the defense side of the ledger,” Reynolds said.
If Congress can get its act together and pass the appropriations before April 30, those penalty caps vanish and most spending levels remain fairly flat, with a roughly three percent boost for the defense budget.
The deadlines to watch, then, are: October 1, January 1 and April 30 (when the draconian cuts from missing that January 1 deadline kick in).
And the people to watch, for now, are the Republicans. If Senate Republicans continue to operate within the spending parameters agreed to in the debt ceiling law, House Republicans — and their efforts to cut spending to far below those levels — become increasingly siloed. And if those House lawmakers stick to their guns, forcing a shutdown at any point in the process, they’ll be tasked with selling the public a fairly convoluted message: We had to shut down the government because it was important to us to break the deal that we helped spearhead just a few months ago.
“Sometimes, a new Congress feels the need to go to war, to have the fight and lose it,” Kogan said.
