Yesterday the House passed a temporary funding bill last week that would keep federal agencies, including the Defense Department, operating at 2013 funding levels through Dec. 15, and also attached two controversial riders, reports Federal Times. One denies funding to implement the national health insurance mandate commonly known as Obamacare. The second sets a priority for what bills the government would pay if it runs out of borrowing power and is left with only cash on hand to cover expenses.
The Senate, and also the White House, have rejected the House proposal but are having problems coming up with a compromise. Senate leaders are determined to prevent any provisions limiting Obamacare and to let the Treasury Department decide the priority for paying bills, but they cannot agree on the length of any temporary funding and are being pushed by some senators to provide reduced funding. They are seeking to provide temporary funding that assumes federal agencies will have their budgets reduced by sequestration in January, and want temporary funding to reflect that lower level. For the Defense Department, sequestration would reduce the 2014 budget by about $57 billion.
To put it simply, it’s a mess. Stan Collender is a senior partner at Qorvis Communications. He is a federal budgeting expert and he joined Chris Dorobek on the DorobekINSIDER program to break down the budget fiasco for us.
This shutdown countdown feels different, like it might actually happen?
“This time is different in a variety of ways. Number one is that a shutdown is more likely to happen than previous threats for six reasons:
- Speaker of the House John Boehner is weaker than he has ever been before. And he has a caucus that is defying him more routinely. Don’t forget this whole strategy that is leading to a cliff-hanger ending on a potential shutdown was dictated by the caucus. It was not what he wanted to do.
- President Obama is a lame duck President. He is also in the weakest position he has been in in a long time to negotiate.
- You have a rested Tea Party that has decided they are a little frustrated by what they have been promised in the past and haven’t gotten.
- You have all these one party Congressional districts, that means for the Tea Party folks their districts are not just red they are crimson red and for their constituents a government shutdown could actually be a good thing. It wouldn’t hurt the Tea Party Congressmen politically to support a shutdown.
- We also have some crisis fatigue. We’ve had so many crisis like this, with budgets, debt ceilings, super-committees and god knows what else over the past few years, that no one is quite taking this seriously yet.
- You also have Democrats in the House saying we are not going to help you out, John Boehner. We are not going to give you the votes just because you can’t get them from your own caucus.
“You put this all together and it’s a witches brew that could lead to the first government shutdown in 18 years,” said Collender.
Could a budget deal be reached?
“There is always hope. But just understand we are asking, expecting or hoping that members of Congress will come to their senses and act rationally at a time when they haven’t really done that for most of the last four years. That’s why I think there is a 70% chance we are going to end up with a shutdown for some length of time. My guess is that shutdown would last for about 4-5 days or the first full week of October. We won’t know until about midnight on September 30th the last day of the fiscal year whether or not we will have a shutdown on the 1st.
If feds are shutdown will they get paid?
“In 1995 and 1996 feds were paid retroactively under the assumption that they would have to work longer hours in the future to make up for the time they didn’t spend working. But there is no guarantee, no requirement, no legal statute that forces that retroactive pay. Under those circumstances it unlikely or less likely now, that federal employees will get paid retroactively for the time the government is shutdown. That is a real shame because it is not just going to hurt federal employees badly it will effect all the businesses they go to as well. We are already starting to see some stores and car dealers in the Washington area say their sales are down because residents in the area are holding back on spending and that is going to happen all over the country if a shutdown occurs,” said Collender.
How will the shutdown affect hiring?
“When you realize that the potential shutdown follows on the sequester and the furloughs that existed there, and that they are threatening sequester every year between now and 2021, you have to ask yourself who is going to want to come and work for the federal government? They are going to want to work anywhere else,” said Collender.
What role does sequestration play in the shudown talks?
“Here are the basics. When we passed the budget control act in August 2011, Congress and the President agreed to budget caps every year between 2013 and 2021.”
- Right now the 2014 cap is below the amount we are allowed to spend in 2013 by about $20-$30 billion. So if Congress just passes a CR at the current levels, it means that in early or mid-January there will be another sequester an across the board cut by $20-$30 billion. Half from defense, half from domestic, to get back to the cap – the spending limit that was set in the Budget Control Act.
- So you have Republicans who want to set the CR at the sequester level. They say let’s just go to it.
- Democrats are saying hell no we won’t go. That’s going to be one of the biggest fights that has to do with the CR.
“One of the gimmicks they are talking about right now is that they want to pass a CR that only lasts until the middle of November at current levels and then have the big fight about sequestration levels then. That would happen between Thanksgiving and Christmas, so happy holidays to everyone,” said Collender.
A CR eliminates a priorities discussion?
“One of the sins of a CR is that it continues the priorities of the past without any recognition that things change. Just because we did something last year, doesn’t mean we have to do it exactly the same way this year. Given that we have been operating under a CR for 3-4 years now in a row for some agencies, we are not determining priorities – the priorities we are imposing now were right 3-4 years ago. Without a real appropriations process, that we haven’t had for years, that’s going to continue. It’s one of the reasons Congressman don’t want to serve on the appropriations committee anymore because they don’t get to do anything,” said Collender.
Essential versus nonessential?
“Remember that those agencies aimed at protecting human life and property can continue to operate during a shutdown. The President can make that choice and that means that DHS and immigration folks will all still be coming to work. When the government was shutdown in 1995 Congress had passed a few appropriations. Now they have passed none of the 13. There will be much broader implications now than there ever was before,” said Collender. “But keep in mind those people who have to go to work will get paid but not until after the shutdown is over.”
Role of social media?
“One of the other big differences is now you have social media. Anyone who is shut out of a national park is going to get on Twitter in a couple of seconds. Their friends are going to see the message and re-tweet it. So the impact could be substantial and almost immediate,” said Collender.
It’s not just the shutdown, but the debt ceiling too?
“If we don’t raise the debt ceiling on October 17th like the Treasury Department says we must, it won’t cause a government shutdown, it just means that the government doesn’t have enough cash on hand on a daily basis to pay its bills. It will pay the bills as it has cash to pay them but some bills will just go unpaid. But it doesn’t mean agencies will shutdown. But the potential debt ceiling debacle would have more and longer lasting negative repercussions for the economy.”
- As Wall Street for years would probably demand some sort of interest payment so that it didn’t happen again. What you are doing is basically threaten a whole variety of people that are not getting paid. Bondholders not getting their interest and principal on time. Government contractors not getting paid on time.
- These are the types of things that everybody that bids for a contract next time will say, maybe it was going to cost you a $100 dollars before but now it is going to cost you $105 because I might not get my money on time in a year.
“I am more hopeful there could be a resolution here because when the Republicans tried to use the debt ceiling as a tool or a weapon during the fiscal cliff the financial community and the business community basically told them to cut it out. I expect the Republicans to punt on it again,” said Collender.
You can find all our shutdown coverage here.
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