In a critical legislative showdown, the U.S. Senate and House of Representatives took divergent paths regarding government funding, increasing the specter of a looming shutdown with just five days to spare.
The Senate made significant strides as it voted 77-19 to commence discussions on a bipartisan bill aiming to finance the government until November 17.
This bill not only allocates funds for domestic disaster relief but also earmarks approximately $6 billion in aid for Ukraine.
However, a different story unfolded in the Republican-controlled House of Representatives, which opted to push forward with its partisan agenda, unlikely to garner support in the Democratic-majority Senate.
The House conducted a procedural vote to advance four spending bills aligned with conservative priorities, but these bills face slim chances of becoming law.
Even if they did, they would only provide partial funding, failing to avert a government shutdown.
This impasse underscores the growing likelihood of the federal government experiencing its fourth shutdown in a decade, a troubling pattern of partisan deadlock that has cast a shadow over Wall Street’s confidence in U.S. government creditworthiness.
Working in tandem, Senate Majority Leader Chuck Schumer, a Democrat, and Senate Republican Leader Mitch McConnell successfully secured bipartisan approval for a short-term extension of federal funding at current levels.
On the House front, Speaker Kevin McCarthy indicated his intention to seek approval from his fractured Republican caucus for a bill that would temporarily fund the government.
However, this proposal comes with stringent border and immigration restrictions that are unlikely to garner sufficient Democratic support in either chamber.
Previously, Democratic President Joe Biden and McCarthy had aimed to preempt a shutdown by agreeing in May, following a standoff over the federal debt ceiling, to discretionary spending totaling $1.59 trillion for the fiscal year commencing on October 1. The White House has urged Republicans to honor this bipartisan deal, emphasizing the need to stop playing politics with people’s livelihoods.
Nevertheless, hardline conservatives to the right of McCarthy have rejected the agreement, demanding an additional $120 billion in budget cuts.
McCarthy’s proposal includes restarting the construction of the U.S.-Mexico border wall, a hallmark of former President Donald Trump’s policies, and tightening immigration regulations. Critics argue that it would effectively bring an end to U.S. asylum for immigrants.
As the prospect of a government shutdown looms, hundreds of thousands of federal workers face furloughs, and a broad range of services, including economic data releases and nutrition assistance programs, could be suspended from Sunday onwards if an agreement remains elusive.
The standoff has raised concerns at credit rating agency Moody’s, though its potential impact on U.S. creditworthiness remains uncertain, given past shutdowns have not substantially affected the world’s largest economy.
Front-running for the 2024 Republican nomination, former President Donald Trump has openly supported discussions of a government shutdown.
However, it’s crucial to note that the cuts advocated by hardliners represent only a fraction of the total U.S. budget, projected at $6.4 trillion for this fiscal year.
Policymakers are not contemplating reductions in popular benefit programs such as Social Security and Medicare, which are anticipated to expand significantly as the population ages.
Congress has experienced government shutdowns 14 times since 1981, with most funding gaps lasting only a day or two.
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