Congressional Budget Office

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• While fiscal discipline has long been the rallying cry for shutdown supporters, the tactic isn’t necessarily effective at reducing the government’s deficit.
• History shows that shutdowns are counterproductive – at least as measured by their own defenders’ goals.
• Fortunately, the past also provides a proven way to reduce the deficit, which I agree is a laudable goal.

Deficits are too high

• When House Republicans say America’s finances are in bad shape, they do have a point.
• The deficit, currently estimated at US$1.5 trillion, and debt held by the public, estimated at $25.8 trillion, are both dangerously high.
• For one thing, large deficits are inflationary and put pressure on the Federal Reserve to raise interest rates.
• That would make interest rates spike and could create a major economic collapse.

Fighting the wrong battle

• I would argue that now is the wrong time for Republicans to take a stand on reducing the deficit, for two reasons.
• The U.S. has had 21 shutdowns over the past five decades, three of which have been major.
• These have all caused real harm to the U.S. economy, but they haven’t led to the spending levels Republicans wanted.
• The bottom line is that they’re ignoring national defense and mandatory spending, which together represent 75% of total spending.

How to get results

• Over the past 40 years, there have been six serious budget negotiations that resulted in deficit reductions.
• One in 2011, negotiated by then-President Barack Obama and House Majority Leader John Boehner, was likely the most successful from a fiscal perspective.
• When it was finally enacted, it generated $1.95 trillion in deficit reduction over nine years.
• These examples show that budget negotiations without threatening a shutdown can be effective at enacting major deficit-reduction plans into law.

• Congress has just 11 days when it’s in session before the next federal fiscal year begins on Oct. 1, 2023.
• And in that time, it will need to enact all 12 appropriation bills to ensure that government agencies and departments have funding to keep programs going – or face a potential government shutdown.
• This is due to the magnitude of the differences not only between the two parties but also between the House and Senate.

One down, many to go

• But just before the House broke for August recess, it passed one appropriation bill, for military construction.
• The problem is the military construction bill is traditionally the easiest to pass, as it is very small – this year it stood at US$19.1 billion in spending.
• This is substantially less than the largest bill, which is usually the Labor, Health, Human Services and Education bill.

Ideological impasse

• These will be vehemently opposed by Democrats and potentially create an impasse in negotiations.
• Another complicating factor is that, recently, the administration submitted to Congress a request for a $45 billion supplemental appropriation that includes $24 billion for the war in Ukraine.
• In the past, these measures would often be attached to either an individual appropriation bill or what is known as a continuing resolution.
• While, constitutionally, appropriation bills must start in the House, they have to be reconciled with whatever version the Senate passes.

A history of shutdowns

• This approach has been endorsed by the White House to give time to negotiate a permanent solution.
• But the Freedom Caucus has indicated it will oppose such a measure unless it can attach many of its ideological riders.
• Since the 1974 Budget Act, there have been 22 such gaps or shutdowns due to the inability of Congress to enact all the appropriation bills.
• This shutdown lasted 35 days – the longest in history.

A record shutdown?

• Politically, the Republicans received virtually nothing beneficial from the 1995 or 2018 shutdowns, and were in fact blamed for both.
• Similarly, Republicans received little in 2013 but also seemed to receive less blame.
• Congress has just 11 working days to pass these bills, and that seems virtually impossible, especially in the current political climate.
• I even wouldn’t rule out a much longer shutdown of a couple of months that exceeds the record 35 days during the Trump administration.