Impending Government Shutdown Looms as Hardline Republicans Refuse Bipartisan Spending Bill

Starting at 12:01 a.m. ET on Sunday (0401 GMT), if Congress fails to pass a spending package that President Joe Biden can sign into law by that deadline, the National Park Service will shut down, the Securities and Exchange Commission will suspend most regulatory activities, and hundreds of thousands of federal workers will face furloughs.

House of Representatives Speaker Kevin McCarthy managed to pass three of four bills on Thursday, aimed at funding four federal agencies. However, these bills, tailored to accommodate hardline conservative demands, have no prospects of being approved by the Democratic-controlled Senate. Even if they were to become law, they would not avert a partial government shutdown, as they do not encompass the entire government’s funding.

A group of Republican hardliners has vowed not to consider the Senate’s proposal to fund the government through November 17, which has garnered broad bipartisan support, including from top Senate Republican Mitch McConnell.

This potential shutdown would mark the fourth in a decade, occurring just four months after a similar standoff nearly pushed the federal government to the brink of defaulting on its $31 trillion-plus debt. The recurrent brinkmanship has raised concerns on Wall Street, where Moody’s has warned that it could harm the nation’s creditworthiness.

In June, McCarthy and Biden reached an agreement to fund the government with discretionary spending totalling $1.59 trillion for the fiscal year 2024. However, House Republican hardliners are demanding an additional $120 billion in cuts, along with stricter legislation aimed at curbing immigration across the U.S.-Mexico southern border.

The current dispute revolves around a relatively small portion of the $6.4 trillion U.S. budget for this fiscal year, with lawmakers not considering cuts to popular benefit programs like Social Security and Medicare.

Several hardliners have threatened to remove McCarthy from his leadership position if he advances a spending bill that requires any Democratic votes to pass, a likely outcome since any successful House bill must also gain Senate approval, where Democrats hold a 51-49 majority.

Former President Donald Trump, Biden’s likely opponent in the 2024 election, has used social media to encourage his congressional allies toward a government shutdown.

House Republicans expressed frustration late on Thursday with their hardline colleagues, who have consistently obstructed the process.

Moderate Republicans are advocating for a vote on their short-term spending measure, which would also likely fail in the Senate if it includes anticipated stringent border measures unsupported by Democrats.

The impending shutdown could also delay the release of crucial economic data, potentially triggering market volatility, and postpone the announcement of next year’s Social Security payment increases for retirees, although Social Security payments themselves would continue.