Shutdown and Default (Sep. 11)

Mike & Co. —

With the Iranian Nuclear Agreement exiting center stage on the Hill in short order, attention will now turn to the biggest and most symbolic fiscal and financial policy debate of the year, with deadlines looming on the FY 2016 budget this month and on the debt limit a couple of months later.

Good weekends all,



Shutdown and Default — Likely Outcomes

These two outcomes are actually exceedingly unlikely, despite much hand-wringing and a flurry of beltway forecasts exaggerating the odds of either occurring.  But averting a federal government shutdown on October 1and a sovereign default thereafter on our national debt payments will likely come with a price in policy that the Republicans will probably have to pay.

A small-scale snarl up at the finish line may mean that a CR to tide us over into December won’t be inked until a day or two after October 1.  But the lesson has been learned by the Senate and by leaders in the House: almost no one remembers or cares how much money Uncle Sam saved during prior shutdowns.

Mitch McConnell was Shermanesque several times during the August recess, quoted to the effect that  “… we’re not doing government shutdowns and we’re not threatening to default on the national debt.”  Per House Deputy Majority Whip Tom Cole last month:  “I think that’s politically disastrous and I also think it doesn’t achieve anything.  The president’s hand gets stronger every day of shutdown and how many times do we have to learn this?

Desperate to avoid another government closure and relying on relying on 20-30 Democratic votes, Boehner & Co. will try to minimize the price of a CR agreement by finessing the efforts of House conservatives to defund Planned Parenthood.  If leadership can get the right to accept a series of high-profile Congressional investigations in lieu of defunding, it can hold the Democrats it has had in the past.  That seems unlikely to cut it with the conservative bloc who have said they simply “won’t vote for a large-scale spending plan that funds Planned Parenthood.”  But the Speaker will prevail because the bloc does not represent a majority of the majority, so a fairly clean three-month CR should clear the House with a substantial bipartisan majority.

The issue in the Senate has been the Democrats’ insistence on a deal that raises spending caps for both domestic and defense programs and in the Senate.  They have successfully blocked consideration of appropriations bills as they try to force Republicans to the negotiating table.  Reaching a final spending deal will entail not only setting funding levels, but also likely address whether any increase should be offset.  The Senate killed a defunding motion onAugust 3, by 7 votes, 53-46 — Sens. Mancin and Donnelly voted with the GOP — removing that item from the table.

The White House has mainly reiterated Obama’s opposition to any legislation that keeps the sequester spending levels in place.  Compared to the President’s budget, the current levels are forcing cuts in areas ranging from research to education to environmental protection, as well as in national security priorities, ranging from homeland security to peacekeeping, foreign assistance and base defense.

Despite the sense in Washington — 50/50 odds of a shutdown is parlor commonplace and budget expert Stan Colander upped his bid to 67 percent this week —  breaking into the sequester coffers is not an insuperable roadblock that would force a shutdown.   Deciding pay-fors may be the stickiest wicket.

Congress has had to address the debt limit seven times since 2010, including the 2013 battle that ultimately led to the government shutdown.  So far, discussion of the impending need to raise the statutory debt limit has been more muted.  Last month, CBO projected that the “extraordinary measures” available to Treasury extends the day of reckoning on default until mid-November or early December.

Once again, the major obstacle to a debt limit increase is in the House.  Ways and Means approved constraints on future increases and a bill on Thursday that would give Treasury the authority to borrow to service bondholder debt and meet Social Security Trust Fund payments if Congress fails to raise the debt ceiling by late October.  Obama had already promised to veto the bill.  House Republicans passed a similar measure in May 2013 in an early act of that debt ceiling drama.  But even the Senate debate will be robust. Several of the hard-line conservatives who fought against raising the debt ceiling two years ago are now running for president and eager for available platforms.  But In both chambers and on both issues, votes, not volubility, will carry the day.

4 thoughts on “Shutdown and Default (Sep. 11)”

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