The U.S. Capitol in Washington, D.C.
Stefani Reynolds/BloombergHouse Democrats reached an agreement on a short-term spending bill to fund the government that would avoid a shutdown, House Appropriations Committee Chair Rosa DeLauro (D.-Conn.) said in a statement.
The plan is expected to be voted on by the House later Thursday. It would have to pass both the House and Senate by Friday at midnight when current government funding runs out.
The temporary funding measure, called a continuing resolution, was to be filed to the House for consideration at 8 a.m. Eastern time, DeLauro said. The CR extends current funding until Feb. 18.
“To build pressure for an omnibus, the CR includes virtually no changes to existing funding or policy,” DeLauro said, except including $7 billion for Afghanistan evacuees.
Current funding expires Friday at midnight. If Congress fails to come to a deal by then, the government would have partially shut down, resulting in hundreds of thousands of furloughs and shuttered government institutions.
Due to the short deadline, the only way to avoid a shutdown was for all 100 senators to agree to schedule a vote before the deadline. But there was no deal by the time the House and Senate adjourned Wednesday, even though House Democrats were hoping to vote on the stopgap measure then.
At the time, Democrats and Republicans were still at odds over some key funding details. Democrats were pushing for a resolution with a shorter deadline in an effort to pressure Republicans to negotiate for the fiscal 2022 long-term budget. Republicans have signaled they were open to extending the continuing resolution for up to a year.
“While I wish it were earlier, this agreement allows the appropriations process to move forward toward a final funding agreement which addresses the needs of the American people,” DeLauro said in her statement.
Conservative Republicans in the House Freedom Caucus urged McConnell to drag out the continuing resolution process unless it prohibits funding for the Biden administration’s vaccine mandates.
“The Senate Republican conference enjoys important leverage against those mandates,” the caucus wrote in a letter to McConnell Wednesday. “We therefore write to request that you use all procedural tools at your disposal to deny timely passage of the CR unless it prohibits funding — in all respects — for the vaccine mandates and enforcement thereof.”
Some of these Republicans have suggested to resolve the stalemate by allowing a simple majority vote on an amendment to the temporary funding bill that removed funding from vaccine mandates.
Since Monday, three judges have frozen federal Covid-19 vaccine rules in certain parts of the country. On Tuesday, a federal judge in Louisiana halted the administration’s mandate requiring healthcare workers to be vaccinated.
Congress also needs to pass legislation raising the nation’s borrowing limit before recessing for the year, as Treasury Secretary Janet Yellen continues to warn of the consequences of postponing the decision.
“I cannot overstate how critical it is that Congress address this issue,” Yellen said at a Senate Banking committee hearing on Tuesday. “America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery.”
Yellen is still estimating that the Treasury could run out of funds as early as Dec. 15, at around the same time the Treasury will invest a $118 billion appropriation to the Highway Trust Fund. The Bipartisan Policy Center estimates that the “X” date could be between mid-December and early February.
Democrats are still heralding a bipartisan solution to raising the debt ceiling, with Schumer expressing optimism that a compromise could be reached.
“I recently had a good conversation with the Republican leader about this issue, and I expect to continue those talks on achieving a bipartisan solution to addressing the debt limit,” Schumer said at a floor speech on Tuesday.
But Republicans are striking a different note, still pushing for Democrats to raise the limit through budget reconciliation, a process that bypasses the 60-vote filibuster and allows them to raise it through a single-party vote.
“Our Democratic colleagues can raise the debt limit all by themselves anytime they want, and there’s nothing Republicans could do to stop them,” said Sen. Patrick Toomey (R.- Penn.) at the Senate Banking Committee hearing.
Schumer and McConnell met Nov. 18, but didn’t announce any final compromises.
“We agree to kind of keep talking, working together to try to get somewhere,” McConnell told reporters afterward.
Failing to address the debt ceiling could have wide repercussions. After a showdown occurred in 2011, in which Congress narrowly avoided defaulting on its loans, Standard & Poor’s downgraded U.S. long-term credit rating to AA+ from AAA. The Government Accountability Office later estimated that the delay in raising the debt ceiling increased government borrowing costs by $1.3 billion in 2011. The S&P 500 fell nearly 20% before recovering.
“A default by the U.S. government would be substantially worse than the collapse of Lehman Brothers in 2008,” said S&P Global U.S. chief economist Beth Ann Bovino. A default would cause the U.S. economy to “fall back into a recession, wiping out much of the progress made by the recovery,” she added.
Government shutdowns, on the other hand, have generally not been an issue for the stock market. A Goldman Sachs analysis showed that in the 14 shutdowns since 1980 the S&P 500 posted a median return of -0.1% the day the budget was set to expire, 0.1% during the shutdown periods, and 0.3% on the day the shutdown was resolved.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
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House Democrats Reach Deal on Stopgap Government Funding Bill - Barron's
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