US Senate Advances Funding Bill Amid Looming Government Shutdown
The US Senate took a significant step forward on Tuesday towards preventing a government shutdown, which is set to occur in just five days. The Senate voted 77-19 to commence the debate on a bipartisan bill that aims to fund the government until 17 November 2023. The bill includes approximately $6 billion for domestic disaster responses and another $6 billion in aid for Ukraine.
However, a conflicting measure backed only by Republicans in the House of Representatives adds uncertainty to the situation. The House is planning to proceed with its partisan approach, which is unlikely to garner support in the Democratic-majority Senate. The House conducted a procedural vote to move ahead on four spending bills that reflect conservative priorities but hold no chance of becoming law and averting a shutdown.
If the divide between the two chambers is not bridged, it seems increasingly likely that the federal government will experience its fourth shutdown in a decade on 1 October 2023. This ongoing pattern of partisan gridlock has begun to negatively impact Wall Street’s perception of the US government’s creditworthiness.
To prevent a shutdown, Senate Majority Leader Chuck Schumer, a Democrat, and Senate Republican Leader Mitch McConnell collaborated to secure the passage of a bipartisan short-term extension of federal funding at current levels. On the other hand, House Speaker Kevin McCarthy, a Republican, expressed his intention to seek approval from fellow Republicans on a bill that would also temporarily fund the government. However, McCarthy proposed attaching tough border and immigration restrictions that are unlikely to garner sufficient support from Democrats.
In May, Democratic President Joe Biden and McCarthy aimed to prevent a shutdown by agreeing to allocate $1.59 trillion for discretionary spending for the fiscal year commencing on 1 October. The White House has urged Republicans to honor this deal, but hardliners within the party have rejected it and demand an additional $120 billion in cuts.
McCarthy’s measure advocates for the resumption of construction on the US-Mexico border wall, a prominent policy of former President Donald Trump, as well as stricter immigration policies that critics fear will effectively end US asylum for immigrants.
The potential government shutdown has raised concerns at credit rating agency Moody’s, although it remains uncertain whether it will impact the US’s creditworthiness significantly. Past shutdowns have not had a substantial effect on the world’s largest economy.
If an agreement is not reached between the two sides, hundreds of thousands of federal workers will be furloughed, and several services, including economic data releases and nutrition benefits, will be suspended starting on Sunday.
Congress has experienced fourteen government shutdowns since 1981, with most funding gaps lasting only a day or two.
