US Fiscal: Tea Party Shutdown Unlikely

Published on September 20, 2013

The next round in the budget brawl on Capitol Hill got underway today with the House voting 230 to 189 to adopt its Tea-Party-infused Continuing Resolution to keep the government funded until December 15. That bill, of course, includes the language to delay discretionary funding for President Obama’s signature Affordable Care Act, and passage was on a nearly straight party line vote, with one Republican voting Nay and two Democrats Aye.

While the Senate takes up the House CR next week, the House is expected to quickly follow the CR bill by the end of next week with another highly partisan-charged bill to increase the federal debt ceiling, which will contain even tougher demands to delay the funding to implement Obamacare for the same one year time frame of the debt ceiling increase.

*** But despite the talk of rising odds of a government shutdown, we believe it far more likely than not a government shutdown on October 1 will be avoided. Ironically, the over-reaching Tea Party demands are making the politics of passing the CR more likely, not less, albeit at some cost in time as well as in leverage to the GOP down the road in negotiating the long sought entitlement and tax reforms. ***

*** That’s the good news. The bad news is that the next battle over passage of the debt ceiling bill will be much more problematic, with significantly less maneuvering room for President Obama and the Senate Democrats. The political brawl over the debt ceiling bill is likely to dominate the Hill through the first two weeks of October, with plenty of scare headlines before a final version is passed, but exactly how and in what form, is for now unclear. ***

CR Obamacare Language to be Stripped Out

The newly amended HJR59 cleared a Rules Committee vote last night, setting the stage for the floor vote that was just completed. The bill continues the funding of the federal government at FY2013’s $986.3billion discretionary spending levels (splitting the $91 billion difference between the House and Senate FY2014 budget resolutions passed last spring).

The House intends to now recess but to come back early by mid next week to debate and vote on the debt ceiling bill, which, by law, must originate in the House Ways and Means Committee.

The CR bill’s key politically-charged inclusion is, of course, the language to delay funding for Obamacare for the length of the CR as demanded by the Tea Party dissidents. They rebuffed the House leadership last week who had supported the softer concurrent resolution language of the original CR drafted last week by Appropriations Chairman Hal Rogers, which would have made it easier for the Senate to approve the CR while voting down the Obamacare resolution.

The new version of Obamacare language in the CR is still expected to be fairly easy to strip out when it is taken up by the Senate early next week. Senate Majority Leader Harry Reid is expected to strip out the Obamacare language, but tactically, Reid will also have to balance the need to win over at least six Republicans with the inevitable Democratic demands, such as an increase in the level of spending.

Going too far to meet the Democratic demands, however, risks stalling the CR in the Senate by losing Republican votes and elevating the prospects for a filibuster by Texas Republican Senator Ted Cruz and a handful of Senatorial Tea Party allies. Cruz has alienated much of the Republican leadership and a majority of the Republican ranks in goading the House Republicans to double down on the Obamacare defunding crusade,even as he now admits his effort to rally the Senate to his side have failed miserably.

We think it unlikely, though, that Reid will go too far in the Senate amendments, though he is likely to hold Senate passage back for as long as possible to give the House a minimal amount of time to tinker with it or amend and “Ping-Pong” it back to the Senate before the midnight September 30 deadline.

Ultimately, our expectation is that Speaker John Boehner and the House Republican leadership will not allow a government shutdown, which to a degree the Senate can take advantage of. And we do expect the Senate-amended version of the CR to be quickly taken up by the House and probably passed with Democratic votes if necessary.

Difficult Debt Ceiling Vote

The debt ceiling bill, however, may be more difficult to manage and to pass without unduly rattling the markets or sharply dropping business and consumer confidence as it did in the summer of 2011. Failure to pass the CR and shutting the government down is seen by both Democrats and Republicans as more costly politically than the threat of a debt ceiling showdown, and so it is on the debt ceiling that the real battle will be fought.

The final version of the House-written debt ceiling bill has yet to be drafted, so it is hard to assess its likelihood of passage or where compromises are likely to be found. President Obama is expected to meet with the Congressional leadership late next week, perhaps Thursday, but it is equally unclear whether that will help or hurt the odds for compromise language in the debt ceiling bill.

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