(The Hill) — Congress is hurtling toward a government shutdown deadline this Friday and lawmakers have yet to strike an agreement to avert a lapse in funding.
Lawmakers are optimistic that Congress will be able to push the deadline once more — just as they did in September — to buy time for a bipartisan deal on overall government funding for most of next year.
But both chambers are still a ways from reaching a compromise, with little time left to prevent what could be the government’s first shutdown in years.
The last partial government shutdown was triggered in late 2018 and ended in early 2019 amid a showdown between the Trump administration and a Democratic-led House over border wall funding.
It marked the longest shutdown in modern history, lasting over a month and leading to hundreds of thousands of federal workers being furloughed or working without pay.
At the time, the Congressional Budget Office (CBO) estimated the gross domestic product (GDP) in the fourth quarter of 2018 was reduced by $3 billion as “a result of reduced economic activity,” when accounting for inflation, with further losses in the subsequent quarter.
The CBO said then that the shutdown “dampened economic activity” primarily due to the loss of federal workers’ “contribution to GDP, the delay in federal spending on goods and services,” and the reduction in aggregate demand, which the office noted had an impact on private-sector activity.
A Senate report estimated taxpayers lost the equivalent of more than 25,300 years in productivity of furloughed workers in fiscal year 2019.
Travel woes and other effects
As droves of Americans prepare to travel for the holiday season, experts in the travel industry have already been sounding the alarm to put pressure on Congress to avoid a shutdown.
During the 2019 shutdown, the Transportation Security Administration (TSA) saw a spike in worker absences that helped spur long lines and travel delays, as thousands of federal employees went unpaid.
Biden administration officials warned earlier this year that a shutdown could also have an impact on air traffic control training, which comes as the government is already trying to address a shortage of controllers.
Other potential effects extend beyond the impact on the aviation industry, however.
For instance, beneficiaries of programs like Social Security and Medicare would still receive their benefits without interruption in the event government funding expires. However, experts have also warned would-be applicants could see issues on the technical side when trying to apply for benefits if the government shuts down.
Economic impact of a shutdown
While a shutdown can have noticeable effects for many Americans depending on how long the funding lapse lasts, experts have still downplayed its overall impact on the economy.
When Congress appeared on track to miss a September deadline to prevent a government shutdown, research from Goldman Sachs estimated then that a funding lapse would have a “modest effect on the economy,” despite noting federal dollars amounts to nearly a quarter of gross domestic product.
The report found that a shutdown would reduce “growth by around 0.15 percentage point for each week it lasted, or about 0.2 percentage point per week once private sector effects were included.” It also estimated that growth would climb “by the same cumulative amount in the quarter following reopening.”
But as a shutdown fight heats up again in Washington, lawmakers have been taking notice of a recent announcement from Moody’s – one of the so-called “Big Three” credit rating agencies – detailing its decision to change its outlook for the U.S. rating from stable to negative, citing risks to the nation’s fiscal strength.
“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability,” the company said.
It added that “continued political polarization” in Congress increases the risks “that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.”
Likelihood of a funding lapse
Lawmakers are staring down a serious time crunch to strike a deal to prevent a shutdown in less than five days, as both chambers move quickly to pass legislation to stave off a lapse in government funding.
Over the weekend, House GOP leadership rolled out a two-step stopgap measure, also known as a continuing resolution (CR), that would fund the government beyond this year. The proposal would extend spending for certain agencies – including the Departments of Veterans Affairs, Housing and Urban Development, as well as the Food and Drug Administration – through mid-January and others through early February.
The goal, leadership says, is to prevent Congress from passing another massive omnibus funding package combining all 12 annual funding bills, just as lawmakers did last year.
“The bill will stop the absurd holiday-season omnibus tradition of massive, loaded up spending bills introduced right before the Christmas recess,” Speaker Mike Johnson (R-La.) said Saturday.
But the plan has already gotten pushback from hardline conservatives who have criticized measure for not doing enough lower the nation’s spending or tackle border security – which means the plan will likely need Democratic support to pass the lower chamber.
“I am opposed to the CR that has been proposed, because it contains no spending reductions, no border security, & no policy wins for the American people,” Rep. Bob Good (R-Va.) wrote on X on early Monday. “I am committed to working with Speaker Johnson & my House colleagues to chart a better path forward for our country.”
At the same time, the Senate is also taking action to bring up its own stopgap, as some Democrats have panned the House GOP’s “laddered” approach to funding the government.