Depth | Is the U.S. federal government going to "shut down" again? Next week will be the last window for MPs | Bills | Window

A familiar scene is happening again, and the U.S. government has once again sounded the "shutdown" alarm.

The 2023 fiscal year in the United States will end on September 30. Due to the resistance of conservative Republican lawmakers, the new fiscal year budget has not been passed so far, and no temporary appropriation bill has been reached, resulting in a sharp increase in the risk of government shutdown. The White House has directed federal agencies to prepare for a shutdown.

The House of Representatives will reconvene next Tuesday to continue negotiating appropriations bills.

Analysts pointed out that next week will be a critical window period. However, in the context of serious political divisions in the United States and intensified fighting between the two parties, Congress's financial management ability has been weakened, and it will be a difficult challenge to reach an appropriation bill before the deadline.

According to reports, the U.S. Congress’s comprehensive spending bill for the new fiscal year contains 12 appropriation plans to provide funds for various government agencies, but the process of introducing the bill is time-consuming. Therefore, Congress usually first passes a temporary appropriations bill to keep government agencies running.

Different from the script in the past where the two parties started fighting each other, this time, the temporary appropriation bill first fell into the "infighting" among the Republicans in the House of Representatives.

Hard-line conservative members of the party opposed the interim budget agreement reached by House Speaker McCarthy and Democratic President Joe Biden earlier this year and demanded deep cuts in federal spending.

At the same time, they also refused to accept any temporary appropriation bill, believing that the latter would still bring excessive expenditures, and Congress must negotiate all 12 appropriation plans.

But typically, Congress would not agree on 12 funding packages until December at the earliest.

In the past week, these hawkish lawmakers twice blocked procedural votes to advance the defense funding package, one of 12 funding programs.

McCarthy felt helpless and frustrated. He said he was inclined to avoid a government shutdown, but hardline conservatives had taken control of the situation. He lambasted the men for wanting to "burn the place down." Even so, over the weekend, McCarthy was pleading with party bosses to change their minds.

What are the hardline conservatives in the Republican Party blocking? Why do we have to make things difficult for our own people?

Wei Zongyou, a professor at the Center for American Studies at Fudan University, analyzed that the extreme right wing of the Republican Party mainly has two demands: First, it is to break the Democratic Party’s budget agenda. This includes cutting spending on climate change, social welfare, foreign aid and other areas required by the latter to reduce the size of the budget and reduce the federal fiscal deficit.

The second is to use private goods on the issue of military expenditures, demanding a significant reduction in aid to Ukraine, or even a cessation of aid.

Conflicts within the party have a long history. Wei Zongyou said that when McCarthy was elected Speaker of the House of Representatives, hard-line conservatives in the party were dissatisfied with his election and worried that he might not be tough enough on the Democratic Party on issues such as tightening the fiscal budget, and even accommodated some of the Democratic Party's policy positions out of political considerations. This time, he used the issue of appropriation for the new fiscal year to attack McCarthy.

In this regard, McCarthy is in a dilemma. On the one hand, they have to take into account the positions of the extreme right, and on the other hand, they are worried that the compromised appropriation bill will not be passed in the Senate controlled by the Democratic Party, resulting in a deadlock.

Diao Daming, a professor at the School of International Relations at Renmin University of China and deputy director of the American Studies Center, pointed out that ultra-conservatives in the Republican Party are obsessed with fiscal issues. They are obsessed with cutting budgets and reducing deficits, emphasizing cutting welfare and reducing aid to Ukraine. Their advocates It is not only at odds with the Republican establishment and moderates, but also with the Democrats.

"The reason why ultra-conservatives are stubborn is that in addition to adhering to a hawkish fiscal stance, they are also forced by electoral pressure." Diao Daming said that there will be a general election next year, and they face challenges from the party's moderates and establishment factions in their constituencies. Promises need to be delivered to voters.

As the September 30 deadline approaches, Congress is still making final efforts.

On September 23, the House Rules Committee took a rare step to establish debate rules for four bills involving appropriations for the 2024 fiscal year of the Departments of Defense, Agriculture, State, and Homeland Security. Because only after formulating the rules can we proceed to discuss the appropriation bill. But it's unclear whether enough Republicans voted for the rules.

At the same time, a bipartisan group of senators proposed new proposals to keep Congress working until a government shutdown is avoided.

McCarthy also hopes that the House of Representatives can move forward and pass 12 appropriation plans when it resumes session on the 26th.

However, the outside world is worried that time is running out, but the House Republicans are still divided among themselves, and the possibility of a government shutdown next week is increasing.

The two scholars also believe that time is very tight. The House of Representatives will resume consultations next Tuesday, which means that there is less than a week left for negotiations, and the risk of "closing down" is high.

"Next week will be the final window. What is worth paying attention to is whether Congress can reach an agreement on a temporary appropriation bill as a temporary transition plan." Wei Zongyou said that if passed, it will temporarily avoid a "shutdown" of the government. However, even if the temporary appropriation bill is passed, it will only be a stop-gap measure. In the future, we will still face fierce competition on the budget for the new fiscal year, and the risk of "shutdown" still exists.

Diao Daming believes that although it is not ruled out that a temporary appropriation bill can be reached, considering that almost all of the 12 appropriation plans are pending, it shows that the disagreements involve a wider range of areas, which means that it will be more difficult to solve the problem with a temporary appropriation bill than before.

Moreover, from a procedural point of view, the Republican Party first needs to resolve disputes within itself, and then talk to the Democratic Party. It is unknown whether they can reach an agreement. "Both parties are currently highly emotional, and American politics has entered uncharted waters. As shown by the Republican Party's decision to open an impeachment investigation against Biden, the two parties are already hostile to each other, and it is not easy to reach a compromise on funding issues."

Diao Daming also added that there would be no surprises even if it was "closed". In the current U.S. political environment, "shutdowns" have become the norm.

Other analysts pointed out that the ultra-conservatives in the Republican Party intend to use the government shutdown as a lever to force the Democratic Party to cut spending, so the probability of a shutdown is high.

Since the U.S. Congress formally implemented the budget process in 1976, the U.S. federal government has experienced 21 "shutdowns."

The most recent one occurred during the Trump administration from the end of 2018 to the beginning of 2019, which lasted 35 days, setting a record for the longest "shutdown" period.

Generally speaking, a shutdown would force federal government agencies to cease all non-essential work, and no pay would be paid during the shutdown. This will result in many military and law enforcement personnel facing pay suspensions, and a large number of federal workers will be furloughed without pay. In addition, food security and food assistance programs, air travel, passport processing and other services will also be affected.

At the same time, a "shutdown" could cause serious damage to the U.S. economy.

According to Goldman Sachs' forecast, every week the U.S. federal government shutdown lasts, economic growth will drop by about 0.15 percentage points. The last shutdown cost the U.S. economy billions of dollars.

If Congress fails to pass an appropriation bill before the deadline this time, public opinion is worried that the impact of the "shutdown" may be even greater.

"Because this time the differences are more serious and cover a wider area, once it is 'closed', the area of ​​impact will be larger, and the federal government will have less room to choose which agencies to 'close'." Diao Daming said.

Moreover, the international rating agency Fitch has previously downgraded the U.S. credit rating due to the debt ceiling crisis. If the country is shut down, it may further affect the outside world's evaluation and expectations of the U.S. economy, which will have a potential impact on the U.S. economy.

In the first half of the year, the U.S. debt ceiling crisis was turbulent, but fortunately the danger was averted at the last moment; in the second half of the year, as the 2023 fiscal year expires at the end of this month, there is another danger of "shutdown".

Why does the United States, which has always prided itself on the superiority of its system, frequently engage in financial management chaos?

In Diao Daming's view, the reasons behind it are more complicated.

First, it has to do with the financial ruin of the United States itself. Due to the massive borrowing due to the hegemony of the US dollar, the financial situation of the United States is deteriorating day by day and moving in an irrational direction.

Secondly, there is a problem of system design. In the design of the U.S. fiscal system, the fiscal year is not a natural year, which narrows the time window for Congress to review the budget for the new fiscal year. To this end, some people suggest that one session of Congress review the budget for both fiscal years to avoid the risk of "shutdown" every year.

The third reason is due to the intensification of party strife. As the struggle between the two parties becomes increasingly fierce, it is impossible to complete the review of the budget within the effective time. Since the start of the new century, no budget for a new fiscal year has been in place before October 1.

"This deadlock on appropriation issues highlights the seriousness of political polarization in the United States. Since the Republican Party only has a slim majority in the House of Representatives, the two parties are evenly matched, making it easier for important agendas to be hijacked by extreme forces within the party."

Wei Zongyou believes that there are two reasons for the "inability" of U.S. financial management.

On the one hand, there are structural problems in the U.S. fiscal system. Take the debt ceiling crisis as an example. The tight budget has pushed up the budget deficit, making it difficult to maintain finances, and adversely affecting the financial stability and economic development of the United States.

On the other hand, it is the result of growing political polarization.

“Today, the Republican Party is becoming increasingly conservative and right-leaning, while the Democratic Party is becoming more liberal and left-leaning. The differences between the two parties in terms of values ​​and domestic and foreign policies are getting bigger and bigger, such as differences on the size of the budget, and even one party has fallen into moderates. The sharp struggle with hard-liners will make it more difficult to solve the fiscal budget problem.”

What’s interesting is that although it hasn’t “closed the door” yet, the “blame-shifting” competition has already begun. The White House says if federal workers don't get paid, it's Republicans' fault. Republicans blamed Democrats for the country's high debt and criticized them for rejecting Republican proposals to cut spending.

"For both parties, it is very important who will be responsible once it is 'closed', especially in the context of the upcoming general election." Diao Daming said.

The two parties are so belligerent that it is not difficult to understand why Congress cannot manage the "money bag" well.