A Last-Minute Deal Averting Government Shutdown Is Unlikely

Erik Wasson and Michelle Jamrisko
·4 min read
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(Bloomberg) -- A late deal to avert a US government shutdown beginning this weekend isn’t likely — with House Speaker Kevin McCarthy making big demands of President Joe Biden and bringing little leverage to the clash.

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The Republican leader counts as one of his proudest achievements an agreement on long-term spending cuts he extracted from Biden in last spring’s showdown over a potential US debt default and now he wants to use a shutdown to get more concessions.

“I want to sit down with the president to secure that border,” McCarthy told reporters Wednesday, as he and Republican hardliners demanded a resumption of construction on Donald Trump’s border wall, stricter new asylum and immigration policies, no new aid to Ukraine and deeper federal spending cuts in return for temporarily keeping the government open.

That Oval Office negotiation isn’t materializing for one simple reason: Biden and other Democrats aren’t afraid this time.

For starters, shutdowns don’t carry the risk of immediate financial turmoil that an unprecedented US default on government debt would have. The nation has weathered plenty of previous shutdowns and, despite the disruption to public services and federal employees’ pay, the economic damage is initially mild and builds incrementally.

Read More: US Shutdown’s $1.9 Billion Risk: No Money for Workers or SpaceX

Republicans are also divided this time, on whether to shut down the government as well as what they want to stop it.

Senate Republican leader Mitch McConnell, who publicly stuck by McCarthy throughout the debt limit battle, this time is backing a bipartisan plan to avoid a shutdown now making its way through the Senate. And he has publicly separated himself and Senate Republicans from House Republicans.

“The Senate and the House are quite different, and I think in the Senate we’re going to continue to try to reach agreement that can pass on a bipartisan basis and hopefully keep the government open,” McConnell said in a press conference Wednesday.

McConnell has also clearly indicated that he shares a widely held view that Republicans will be blamed by the public for a government shutdown and ultimately have to capitulate. On the Senate floor he framed the choice for Republicans as agreement on temporary funding “or we can shut the government down in exchange for zero meaningful progress on policy.”

McCarthy, who won a House vote for a debt-limit increase tied to specific demands well ahead of a potential default, this time can’t get GOP lawmakers to agree on an initial offer.

What to Know About the Looming Government Shutdown: QuickTake

He and his lieutenants want to make the approaching shutdown about the surge of migrants coming across the southern US border, but they have been unable to unite the party on an opening bid. Even a 31-day spending bill with a 27% cut to domestic spending and asylum law changes still lacks the votes to pass the House.

Biden offered hope Wednesday afternoon that a shutdown might be avoided.

“I don’t think anything is inevitable in politics,” Biden told reporters during a meeting with his science and technology council in San Francisco.

But the president and his advisers have made clear they consider the new demands for spending cuts to be reneging on the deal on spending levels that McCarthy made during the default standoff.

“The fact is that I think that the speaker is making a choice between the speakership and American interests,” Biden said at a campaign fundraiser on Wednesday.

Bloomberg economists Anna Wong and Alexander Isakov, citing a presidential-election model, suggest that the longer a lapse in government funding continues “and the further any post-resolution ‘bounce back’ is pushed into 2024 — the better it will be for President Biden’s chances.”

They, add, however, that if the Democrats agree to significant spending cuts, that could well “weigh on the economy next year — something for which voters tend to blame the incumbent party.”

The shutdown came up only briefly during Wednesday night’s Republican presidential debate in California with former New Jersey Governor Chris Christie saying that voters ought to blame “everybody who’s in Washington, D.C., they get sent down there, to do the job. And they’ve been failing at doing the job, for a very long time.”

Another Front

The Republican infighting has moderates looking to work with Democrats to end the shutdown by passing a stopgap measure without conservative priorities. They could force the House to vote on such a plan using an arcane rule, but not before the Oct. 1 deadline.

One of the moderates, Mike Lawler of New York, said he has told his colleagues that they have to make an opening offer, that “you can’t win with nothing” and they need to pass a Republican stopgap bill.

“If folks are unwilling to do that by the time we need to act, then I will,” Lawler said.

--With assistance from Jennifer Jacobs.

(Updates with Republican debate, in 18th paragraph.)

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