Why has "shutdown" become an "American characteristic"

The end of the long summer recess has once again heightened the atmosphere on Capitol Hill in the United States.

As the 2023 fiscal year in the United States approaches its end on September 30th, lawmakers from both parties who are returning to work are ushering in the annual "Catastrophic Legislation Month".

Capitol Hill: The Senate Returns to Dramatic September

Due to the Biden administration's new fiscal year budget not being passed six months after being submitted to Congress, the possibility of a government shutdown has inevitably become a hot topic in public opinion.

21 lessons learned from previous experiences

At present, the White House is urging Congress to pass a short-term funding bill called a "sustainability resolution" to provide funding for the federal government, in order to avoid the government falling into a "shutdown" before the start of the new fiscal year on October 1st due to lack of funds, and also to buy time for advancing a "broader spending bill.".

The broader spending bill refers to the 2024 federal government budget proposal submitted by the Biden administration in March, with a total amount exceeding $6.8 trillion.

In theory, Congress has enough time to make a decision on this budget before the start of the 2024 fiscal year.

However, due to the fact that both parties in the United States have long been accustomed to turning fiscal issues into party bargaining chips, budget proposals for each fiscal year often have to be delayed for two to three months, which is until December of that year, when the dust settles in the complex and intense negotiations.

Screenshot of The New York Times report

In this process, when the government is about to run out of money, it must rely on fragmented "sustained resolutions" from both parties in Congress to barely maintain its operations and avoid shutting down.

And when the issue of "spending money" is related to pre election party struggles, guess what will happen?

According to the responsible federal budget committee, a non partisan organization in the United States, when lawmakers are unable to reach an agreement on new fiscal year funding before the end of this fiscal year, Congress may even pass multiple "ongoing resolutions" to provide funding to the government.

For example, before the 2000 election, the two parties in the US Congress had a series of tense negotiations around the 2001 fiscal year budget, with a total of 21 "ongoing resolutions" passed; Nevertheless, only government operating funds were provided for the first three months of the new fiscal year.

Screenshot of the official website of the United States independent organization, the Responsible Federal Budget Committee

Although it may sound absurd, do not assume that both parties in Congress can always pass a "sustained resolution" to prolong the government's public service.

In fact, the intensifying two party struggle in recent decades has led to 21 shutdowns of the US government.

In 1974, the United States introduced the Congressional Budget and Interception Control Act, which transferred budget management authority from the executive branch to the legislative branch, thus initiating a debate in the House over budget issues.

Affected by this new law, the US government experienced its first shutdown in 1977, lasting a total of 28 days.

The latest shutdown occurred during the Trump administration from December 2018 to January 2019, lasting for 34 days. This is also the longest lasting government shutdown in American history.

The New York Times listed 21 times the US government has suspended operations

After the 2013 government shutdown crisis, then US President Obama called for "we must break free from the habit of relying on crisis to govern the country.".

But in the increasingly polarized politics of the United States, how can this be possible?!

The shutdown of US governance capacity has become a fact

Undoubtedly, if the US Congress fails to pass the short-term funding bill before September 30th, the depletion of government funds will endanger numerous federal project plans, affecting millions of Americans, including low-income families.

According to American media, this is the second time the US government has fallen into a fiscal crisis this year.

Screenshot of a report by The Washington Post

The first fiscal crisis was naturally the debt ceiling crisis in the first half of the year.

After the US public debt exceeded the debt ceiling set by Congress for the last time at the beginning of the year, the two parties battled for several months before passing the so-called 2023 Financial Responsibility Act at the last moment before the US Treasury Department was expected to become insolvent in June.

According to the bill, the federal government debt ceiling will be suspended until January 1, 2025 to meet government borrowing needs before the November 2024 election. As an exchange, Republicans are demanding restrictions on government spending for the next two years while not increasing taxes.

However, this bipartisan compromise bill at best only temporarily avoids debt defaults. At the end of the day, the government's funding needs to rely on congressional appropriations. This has triggered the current tension.

Richard Francis, senior director of rating agency Fitch, pointed out that neither Republicans nor Democrats in the United States have been able to find a meaningful long-term solution to address the increasingly severe fiscal crisis.

It is almost certain that the 2024 fiscal year budget submitted by the Biden administration will ignite a new round of party struggles.

In this budget proposal, the total expenditure of $6.88 trillion and the estimated total revenue of $5.04 trillion will result in a deficit of $1.84 trillion, with a deficit rate of 6.8%, which is 1.3 percentage points and 0.8 percentage points higher than the fiscal years 2022 and 2023, respectively.

But now it seems that the sensitive issue of fiscal deficits may be even more pessimistic than estimated, especially with the US federal debt already exceeding $32 trillion.

CNN: It is estimated that in the 2023 fiscal year, which ends at the end of this month, the US federal budget deficit may reach about $2 trillion, which is not only double the level of the 2022 fiscal year, but also far higher than the deficit level used as a reference in the 2024 fiscal year budget.

Republicans, represented by House Speaker McCarthy, have been calling for significant cuts in government spending and deficits, and insist on voting separately on all 12 pieces of legislation that make up annual budget spending.

At the end of the day, both parties aim to force each other to sign and sign an agreement that is favorable to themselves and unfavorable to the other, and this opposition is bound to threaten many government jobs in the new fiscal year.

How much impact will the soaring deficit have on the US economy? Will it trigger another US government debt crisis?

Some analysts believe that by the early 1930s, the US federal deficit may add nearly $3 trillion annually, which will push up interest rates and gradually make interest payments the largest expenditure of the US government, thereby increasing the risk of a debt bomb explosion.

Screenshot of a report by The Washington Post

According to the Peterson Foundation's forecast, the United States will increase its debt by an additional $127 trillion over the next 30 years on top of its existing foundation; By 2053, interest costs alone will consume nearly 40% of federal fiscal revenue.

Screenshot of the Peterson Foundation's official website

Therefore, regardless of whether this round of party struggle will bring about the 22nd shutdown of the US government, it will only be a "midfield" rather than an "end game". The suspension of US governance capacity has become a fact.

As the international rating agency Fitch Ratings said last month after downgrading the default rating of long-term foreign currency issuers in the United States, "Over the past 20 years, the level of US governance has continued to deteriorate, including fiscal and debt issues. The repeated political stalemate on the debt ceiling and the last minute solution have weakened people's confidence in US fiscal management."

Screenshot of a report by The Guardian in the UK

Source: Global Information Radio's "Global Deep Observation"

Planning | Wang Jian

Reporter | Li Yan

Editor | Lin Wei

Signature and Review | Wang Jian

Producer | Guan Juanjuan