Lawmakers are back and the September 30 deadline to fund the federal government for fiscal year 2024 — or to pass a continuing resolution for stopgap funding until negotiators can agree on appropriations — looms larger by the minute. Can Speaker Kevin McCarthy unite his fractured conference on spending?  Will there be a government shutdown?  And how much money would it cost taxpayers?  TCS Senior Policy Analyst Josh Sewell joins host Steve Ellis to find the answers.

Episode 52: Transcript

Announcer:

Welcome to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget, spending, and tax issues facing the nation. Cut through the partisan rhetoric and talking points for the facts about what’s being talked about, bandied about, and pushed in Washington. Brought to you by Taxpayers for Common Sense. And now the host of Budget Watchdog AF, TCS President, Steve Ellis.

Steve Ellis:

Welcome to All American Taxpayers Seeking Common Sense. You’ve made it to the right place. For over 25 years, TCS, that’s Taxpayers for Common Sense, has served as an independent, nonpartisan budget watchdog group based in Washington DC. We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are on the political spectrum, no one wants to see their tax dollars wasted.

Welcome to September, everyone. I wish we had better watchdog news from our perch here on Capitol Hill, but we don’t. The September 30 deadline to fund the federal government for fiscal year 2024, or to pass a continuing resolution for stopgap funding until negotiators can agree on appropriations looms larger by the minute. Lawmakers are coming back and this is when it gets real fast. Real fast.

With regular order out the window again, will there be a government shutdown? How much money will that cost taxpayers? TCS Senior Policy Analyst, Josh Sewell, joins me now with all the answers. Hi, Josh.

Josh Sewell:

Hi, Steve. It’s good to be back.

Steve Ellis:

So Josh, right before he went home for summer recess, Representative Bob Good of Virginia, a member of the Freedom Caucus, told the press, “We should not fear a government shutdown. Most of what we do up here is bad anyway. Most of what we do here hurts the American people.” So besides the fact that he doesn’t seem too happy with his job, let’s talk a little bit more about some of the factors at play. Josh, is House Majority Leader Hakeem Jeffries right when he says the appropriations process has been hijacked by the most extreme wing in the Republican Party?

Josh Sewell:

I think he’s partially correct.

Steve Ellis:

Why the qualifier?

Josh Sewell:

So mainly because the spending bills, like almost anything happening in Washington, is occurring in a very partisan environment. And frankly, I think more importantly, in a divided government. And divided government is not conducive to smooth legislative sailing.

Steve Ellis:

So by divided government, you’re talking about how you’ve got a House Republican majority, a Senate Democratic majority, and a Democrat in the White House, right?

Josh Sewell:

Exactly.

Steve Ellis:

So partisanship does seem high right now, and people point to divided government leading to an increase of ranker and inability to pass legislation.

Josh Sewell:

Yes. I mean, just think of the first debt limit crisis in 2011 after Republicans took the House in 2010 with the help of those Tea Party Republicans and their focus on cutting spending. Then you had government shutdown, don’t forget, in 1995, which happened after a wave election for the GOP with Democrat Bill Clinton as president, and hey, the last time we had a, well, not the last time, but the first time we had a shutdown in a long time back in 2013. Same kind of dynamics.

Steve Ellis:

Yeah, but partisanship has always part of this process and divided government seems to be more the rule than the exception. There hasn’t been that many years of unified government control by one party.

Josh Sewell:

Yeah. Well, now Speaker McCarthy has a math problem. So as a reminder, the majority is 222 to 212 and there’s one vacancy in a Democratic seat.

Steve Ellis:

Right. And that’s because normally you’d have these wave elections that kind of create this sort of partisanship and ranker. And clearly this isn’t a wave election or wasn’t a wave election for the Republicans in the House. But on a strictly party line vote, the majority can only afford to lose four votes of their conference, right?

Josh Sewell:

Yeah. And that is the tightest House margin of my career. And it leads to potentially a lot of power vested in a small number of people if the underlying bill or issue does not attract that broad bipartisan support.

Steve Ellis:

But let’s go back to Minority Leader Hakeem Jeffries. Is he right about the appropriations has been hijacked?

Josh Sewell:

So maybe this is semantics, but I take exception with the term hijacked. I mean, using the tools that you have to gain leverage and achieve the outcomes you want, that’s politics. It’s not nice. It doesn’t feel good sometimes, but that’s politics. And it’s true that Freedom Caucus members have been some of the most active in using that leverage. But you can just look, I mean, as a case in point, just look at the multiple rounds of voting it took for Representative McCarthy to become Speaker McCarthy.

Steve Ellis:

Well, isn’t that part of the issue here? I mean, that he’s concerned about his job because clearly they already struck a deal back earlier in the summer on the debt ceiling and agreed to spending levels. And so couldn’t Speaker McCarthy gather some support from the Democrats to pass those appropriations bills? But then I guess he’s worried that all of a sudden they’ll make a motion to vacate the chair and out he’ll go as a very short-live speaker.

Josh Sewell:

No, and that is. And so this really comes down to politics and self-preservation in some respects. To be fair, I think folks who are asking for spending levels below what was in the budget deal have moved the goalposts. But I mean, it’s their right. It’s their prerogative. And so I think in the end, their demand is just not politically plausible.

Steve Ellis:

So you mentioned an important point there that we hadn’t discussed yet. Podcast listeners, there was spending caps agreed to for two years in that debt ceiling deal. So it wasn’t just that they were pushing off the debt ceiling until 2025, they also agreed for enforceable caps for the next two fiscal years. And basically the members of the Freedom Caucus that we’re discussing took that cap as a literal term and are trying to go below that, not treating it as a floor, but treating it as a ceiling and trying to cut even beyond. And so is it plausible? I mean, how does this game out for the Freedom Caucus?

Josh Sewell:

Yeah, and this is where it’s not plausible. I mean, the Senate won’t do it. I mean, the Senate, both Republicans and Democrats have said, “We went through the hard process of getting a deal. We’re going to stick to that deal.” And the Senate has been working on their bills in the Appropriations Committee at the levels in the budget deal. And so for the House to come back and say, “Well, actually we’re going to go back to 2022 levels,” and some even want to go farther back than that, it’s just, it’s not going to happen.

And so again, I don’t blame Freedom Caucus folks or others for using the tools that they have and advocating for what they want. But there’s a point where it’s not going to happen. But I also want to point out that we’re talking about appropriations and the Freedom Caucus, but they aren’t the only people in Congress who are using leverage.

Steve Ellis:

Right. The House bill that was used to lift the debt ceiling, at the last minute members of the Corn Caucus withheld their support until sections repealing a bunch of biofuels and ethanol tax credits were removed. Right?

Josh Sewell:

Right. And those were biofuels tax credits that were a part of the IRA that none of them voted for, none of those Republicans voted for. But are those members being branded the ethanol extremists or biofuels bandits? No. Maybe they should be, but they aren’t. And neither are the groups of Republicans, who are mainly from blue states, who are threatening to tank extensions of expiring tax cuts unless they get their repeal of the $10,000 limit on deducting state and local taxes.

So I mean, there are defense hawks out there threatening to be obstacles unless more money is spent on the Pentagon. And so I mean, the Freedom Caucus folks, they’re just the most active and obvious and in some ways the biggest thorn in the side of the speaker.

Steve Ellis:

But yet with the new fiscal year looming, their abstinence could be costly. I mean, there’s been some calculations on how much previous shutdowns have actually cost taxpayers.

Josh Sewell:

Yeah, there have been. And so I think it was the last shutdown that we had, the CBO, the Congressional Budget Office actually ran the numbers and it decreased GDP in the period while it was there between .3 and .6%. And then you come into the actual federal spending, it actually ended up causing $11 billion in less spending. Some of that was delayed, but ultimately you had $3 billion that never went out the door, so you lost that economic activity.

And so there’s an actual real number to some of these things that you can see. There’s also a lot of inconveniences that aren’t calculable as a federal cost or savings to individuals and businesses that rely on the various federal programs, or are just at least affected by that downstream spending.

Steve Ellis:

Right. And less economic activity also means less tax revenue for Uncle Sam as well.

You’re listening to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget, spending, and tax issues facing the nation. I’m your host, TCS President Steve Ellis, and we continue now with Mr. Agriculture, Josh Sewell.

So Josh, we’re at the point where the end of the fiscal year is less than a month away. Is a government shutdown inevitable?

Josh Sewell:

So two weeks ago, I would’ve said yes, maybe even two days ago. I couldn’t see a path for folks to really move in their positions. There’s a lot of folks who’ve dug in their heels. And less than a month and which could be just a handful of legislative days, yeah, that’s not going to happen.

Steve Ellis:

Yeah, I was asked before what I thought was the likelihood of a shutdown, and just a week ago I said 85%, and I’m kind of stepping back from that. So what happened in the last couple weeks that changed your mind?

Josh Sewell:

Well, I mean, stuff got real. I mean, the speaker himself publicly floated the need for a short-term continuing resolution, which would keep the government running, had basically existing levels possibly through December. Then you had the wildfires devastating Hawaii. Hurricane Hilary led to massive flooding, especially in California. And then we’re still in the throes of a hurricane going through Florida and Georgia. So it seems that there is real momentum building for some sort of emergency spending to take care of some of those needs.

Steve Ellis:

Yeah. And podcast listeners can remember that we discussed that earlier this summer or just earlier in August, that the administration sent a $40 billion request that was for some money for Ukraine, some border-related funds, $12 billion to resupply the Disaster Relief Fund, which is obviously being tapped even more than it was when they made that request. And the balance at the end of August was down to $3.4 billion, which is far short of what will be needed as we go through more of the heart of hurricane season.

Josh Sewell:

Yeah, exactly. And I guess maybe it’s an understatement to say that there’d be some mixed signals to adopt an emergency supplemental then turn around and shut down the government days later. It’s just weird.

Steve Ellis:

Yeah, and it’s also, it’s kind of hard to see that… Part of the issue is getting a vehicle, and clearly disasters have been a vehicle for CRs in the past, and that there’s a clear need for the spending, and so it doesn’t have to stick out by itself and it catches a ride. So let’s get into the mechanics of if there is a shutdown. I mean, because I guess the thing is is that even if there’s a CR, if it’s a short-term CR, and I mean really short-term, a week or two weeks, not into December, I still think a shutdown is really plausible and possible. And certainly there are people who are cheerleading for it, just like we discussed earlier with Representative Good. So what’s the mechanics? What happens when the government “shuts down”?

Josh Sewell:

So I mean, for a shutdown, it’s actually a very busy and complicated process. And so ultimately, it has a lot of costs with little to no benefits in, I think for most people’s calculations. So just some of the mechanics is actually happening right now. Every agency has to spend the time and money developing a shutdown plan. They actually go through the bureaucratic process of writing out a plan of what they’re going to do, and they basically identify who’s essential, who’s non-essential. They also have to identify where their funding comes from. So you have such a massive federal budget and a lot of different actual spending lines, and so is the funding coming from the annual appropriations or is it coming from some other sort of fund, say fees that people pay or other sort of non-taxing fees?

Steve Ellis:

So basically when a lapse in funding does occur, if there is a shutdown, those essential workers that the agencies have identified, they have to stay on the job. And the non-essentials, they’re locked out of the buildings and they’re locked out of their computers if they’re not in the buildings. And those who have secured funding from some other source oftentimes, including those past appropriations, can keep working.

Josh Sewell:

But it’s not cut and dry. It’s not very obvious from the outset. And it takes a lot of time and effort, frankly, to figure it out, to even plan for a shutdown.

Steve Ellis:

Yeah. And we saw in the last shutdown that was under the Trump administration. Because he had seemed to be cheerleading for it, they were actually trying to make it have a less impact on the public, to make it less painful. And so you had cases of where the Park Service was using entrance fees for other uses that were deemed not appropriate.

And you also had a big change where there was a lot of people talking about, and obviously this is close to my heart, about the Coast Guard and how because of DHS being shut down, that whereas other military services were actually deemed essential, that the Coast Guard was having to do some of their work but then wasn’t getting paid as essential workers. And then certainly the Coast Guard is heavily involved in disasters and in search and rescue and things along those lines, or FEMA, for instance, as well.

So when you think about it, essential workers tend to be military, law enforcement, air traffic controllers, USDA meat inspectors.

Josh Sewell:

Yeah. And honestly, whether or not you can pay the military. I mean, we have a large military with a lot of members. Even if they’re essential, they’re not going to get paid unless you have that exception. And so, I mean it’s just a very complicated issue. And you mentioned meat inspectors and yeah, USDA meat inspectors are essential, but in the last shutdown, not all FDA inspectors were, so the Food and Drug Administration. And because you have this bifurcation between certain foods are FDA and certain foods are USDA. And so meat and eggs, yeah, they got inspected, but some of those foods in manufacturing facilities for other things, they weren’t inspected. It’s ridiculous, frankly. And also thank God that catfish is USDA inspected so we know we’re getting quality catfish.

Steve Ellis:

Yeah, exactly. We know we’re getting that. Yeah.

Josh Sewell:

So also it’s one of these issues where federal programs that are implemented by states, which a lot of them are, such as nutrition assistance, the SNAP program, those often continue because the money is already obligated and the state is the one doing it. But you think about the timing of a shutdown, if it goes beyond a month or if it crosses that first of the month threshold, you start to lose that money. And so then you’re going to see potentially folks losing their ability to get that assistance because the feds can’t actually process the paperwork to get the next tranche of funding to the states.

So either the states have to cut people off of some of these welfare programs that many of them are affecting people who are rather destitute, or the states can continue, but then the risk is on them. They have to come back and receive reimbursement from using their own cash. And we know many states are either cash-strapped or just certainly don’t have a… They either can’t run deficits or they have a hard time with a lot of flexibility in their rainy day funds. And so it’s not just causing heartburn, it causes harm to folks. And it’s inefficient. It’s inefficient. And ultimately, I’m not sure what we get out of it.

Steve Ellis:

Right. Because in the end, no money is saved. I mean, going back to Congressman Good, his comments is that even if you agree that all they do is harm people or whatever, eventually government is going to get funded. And not only that, for those workers that were deemed non-essential and didn’t go to work, they still get paid. So I mean, we’re basically paying them because it’s no fault of their own that they are not going into work. They’re legally not allowed to enter the building. They will be turned away. They get all that back pay. And so we end up actually spending more money because we’re not getting whatever jobs or whatever things they actually do. I mean, it’s stupid.

Josh Sewell:

No, it is. And I don’t have any problems with having the debate about whether or not we should be doing X program or whether or not our government is too big, doing too much. But these shutdowns haven’t forced that debate. Not really. They have not led to cutting of agencies. They have not led to permanent savings, or even temporary savings. We’ve seen the numbers just aren’t there.

And so, one thing that they have led to which you mentioned the Park Service, the Trump administration keeping the parks open. I mean, this is something I do remember from the 94-95 shutdown when I was very young, is the pictures of, is the first time you’ve seen the National Mall closed. You saw locking the gate of Yellowstone so no one can come in.

Well, they didn’t do that in the last shutdown because the Trump administration tapped this fund that was created years ago. When you pay to go into a national park, part of your fee goes into a pot of fund to tackle a multi-billion dollar backlog for major maintenance. So think of things like repaving the going to the Sun Road in Glacier or fixing crumbling visitor centers, building new bathrooms in places where they don’t exist.

Well, the Trump administration redefined trash collection and restroom cleaning as major maintenance and used that fund, which is designed for paving roads and building buildings, to clean bathrooms so they could stay sanitary and keep the parks open because they didn’t want to shut down a bunch of parks and hunting areas, a place where people fish and recreate, and had the political blowback on them.

Technically, that was a violation of the Anti-Deficiency Act, and let us have a moment of silence for Wendy Jordan and her love of the Anti-Deficiency Act. But we have done a lot of work on that too. But in the end, it’s just frankly asinine. These things cost money. Shutdowns don’t achieve much. They don’t lead to enduring spending cuts. I don’t know what we get out of it. And they’re not even politically advantageous. They’re just dysfunction.

Steve Ellis:

Yeah, certainly history’s kind of shown that whoever gets blamed for the shutdown, and certainly there are some cheerleaders for the shutdown in the House Freedom Caucus, that it hurts their party politically. And so it’s kind of an interesting game that Speaker McCarthy is kind of gambling here. Even though he’s called for a continuing resolution, if he caters to the Freedom Caucus and it leads to a shutdown, that’s going to hurt his speakership and maybe he’ll be a one-term speaker. But he’s kind of gambling on that, at least it appears right now.

Josh Sewell:

It does. And I think this is a time where we call for this a lot, but leadership doesn’t come from the back. You lead from the front. And I think to be the speaker, to be anyone in Washington, you need to make the tough decisions. And there’s a time where you can choose the interest of your constituents and the country over your own political future and what you think, because frankly, I mean, yeah, maybe he’s damned if he does, he’s damned if he don’t, so let’s not cost us a bunch of money, dysfunction and lead to more problems. Let’s just move forward, give yourself a couple months, and then have these debates again. We’re going to fight about these spending levels for the foreseeable future. We don’t need to shut down the government and then still not actually make any progress.

Steve Ellis:

I mean, certainly there are people who you could argue were very aggressive about cutting government and cutting spending that are now pushing for a continuing resolution. Senator Scott from Florida obviously just hit by a hurricane, that he wants to get a continuing resolution through and he wants to get the funding for the supplemental. And so that’s certainly going to be a big debate in the ending days, I should say, of this fiscal year.

And let’s be clear, I mean a continuing resolution is the least bad option in that still there’s a cost of continuing resolutions. It stalls government. It doesn’t allow agencies to plan for the future. And so it’s not like that’s a good thing, but it’s a better thing than having a shutdown.

And as you pointed out earlier, Josh, I mean the House has passed one appropriation bill, one out of the dozen, but the committee has passed all the 11 others, the Senate committees have passed all 12 of theirs. So the bills are written, and now it’s a question of just hashing all of that out and getting to over the goal line.

And It’s funny, we talk about regular order, but really irregular order is what is the rule, not the exception. They’ve only passed, since they created the budget process in 1974 the federal government has only had all the spending bills done four times, nearly 50 years, four times. The last time was for fiscal year 1997. The last time they were done individually and on time, regular order, was in 1994 for fiscal year 1995.

And so something needs to give and there needs to be some pressure to actually get Congress to do their jobs. Leaving aside the whole shutdown shenanigans that are going on.

Josh Sewell:

The history of appropriations shows that a continuing resolution isn’t the end of the world. I mean, we don’t have to rush to get things done. You don’t have to bend to a small minority of folks who want to change the rules of the game that we all have just agreed to. It’s better to just extend it a little bit and get a little bit better bills a little bit later. And there’s always room for doing some anomalies. CRs are not very good, but you can make some adjustments, immediate adjustments for some of the critical programs that need to respond right now.

Steve Ellis:

And since I earlier called you Mr. Agriculture, doesn’t the Farm Bill expire at the end of this fiscal year?

Josh Sewell:

Yeah, but who caress? Yeah, technically the Farm Bill does expire at the end of September. And so dogs and cats would start sleeping together and the world would fall apart, except it won’t. And so it’s one of those things where real-world ramifications of an expiring Farm Bill don’t really happen until months later. When they do, the government would have to start reviving some ancient programs from the dead. And so maybe you’ll throw in a Farm Bill extension along with the CR and some other things. That would be fine with me. It would give us another year to really educate members of Congress of some reform opportunities. But it shows there are a lot of other things that Congress needs to work on. So let’s get some of this stuff done.

Steve Ellis:

Josh Sewell, thanks for helping all of us look around the congressional corner. It’s coming up fast.

Josh Sewell:

Yeah. Thanks, Steve. It’s always fun.

Steve Ellis:

Well, there you have it, podcast listeners. Fear the shutdown, don’t fear the shutdown. Either way, it’s your money and you deserve better. This is the frequency, mark it on your dial, subscribe and share, and know this, Taxpayers for Common Sense has your back America. We read the bills, monitor the earmarks, and highlight those wasteful programs that poorly spend our money and shift long-term risk to taxpayers. We’ll be back with a new episode soon. I hope you’ll meet us right here to learn more.